For the foreseeable future, children’s apparel vendors and retailers should continue to see their business shaped by recession-savvy bargain hunters, according to industry analysts and advisers.
On top of slow sales, the down economy over the last two years has forced 20 to 24 percent of the U.S.’s 4,000 children’s apparel vendors out of business, according to Marshal Cohen, chief industry analyst with the NPD Group. “Companies have gone under, but the majority of closures have been vendors who treated children’s apparel as a secondary business,” he said. “All retailers are leaner and meaner, and they don’t need 17 versions of a child’s golf short anymore.”
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Likewise, consumers are reshaping the market by buying more children’s apparel at discount stores and factory outlets at the expense of department and fashion specialty stores, as well as children’s chain stores. A consequence has been falling prices across the board.
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In the first five months of this year, the average price for an article of children’s clothing was down 5.3 percent to $5.63 from the same period in 2008, according to NPD. For all of last year, the average price was $5.85, which was 2.2 percent below 2007.
But sales in the children’s apparel market also are stabilizing, and still continue to be less affected by the economy than women’s or men’s apparel. This year, children’s clothing revenues are expected to be flat or down 1 to 2 percent in contrast to 2008, when they fell 2.2 percent to $35.91 billion. And in 2010, revenues should increase 2 percent for the year, cohen projected.
Now that retailers have adjusted their prices downward and brought inventories in line with demand, this year’s sales for the important back-to-school season also may be relatively good, said Stacy Janiak, vice chairman and u.s. retail leader at Deloitte LLP. “In a good [back-to-school] season two years ago, your sales had to be up 5 percent or more, and now if they’re flat, it’s probably good,” Janiak said. Still, “I don’t think you get through the season without some very targeted promotions because of the laser focus on value.”
A recent Deloitte survey of 1,044 parents found apparel is second to school supplies as the most important purchase for the season. However, 81 percent of respondents said they’ll be spending less on it, while 32 percent said they’ll spend less on supplies. On b-t-s shoes, the third most important item on shoppers’ lists, 49 percent said they plan to spend less.
A b-t-s survey by Wedbush Equity Research Department found 62 percent of 1,031 parents and 509 teens are cutting back on spending, although the same people showed “a strong willingness to spend more on clothing,” at the expense of dining out, vacation and other entertainment.
Additionally, among those with household incomes above $49,000, price was the third most important factor, next to quality, style and fit, in choosing children’s apparel. “These results suggest the importance for trend-right merchandise that is well-designed versus merely focusing on price competition,” Wedbush said.
There is also another variable affecting children’s clothing sales for fall: a decline in children’s allowances and availability of part-time teenager jobs.
“Given the current macro environment,” Wedbush added, “we were not surprised by survey data indicating adult and teen shoppers’ plans to allocate more of their spending at big-box stores (including Wal-Mart and target) and off-price retailers such as Ross, J.C. Penney and T.J. Maxx.