This article was published by Forbes March 16, 2021.
The U.S. Census Bureau retail report showed a sales decline of 3% in February as compared to January. However, when comparing this year sales to February 2019, sales increased 2.2% (minus automobiles and gasoline). Apparel and accessories were down 14.9% in the same year-over-year comparison. Department stores (heavily reliant on apparel and accessories) were down 17.9%. Apparel retailers are counting on a bump in sales from warmer weather coming out of February and into March. Easter this year falls on April 4th which will also boost pre-holiday sales in March for apparel and accessories. Several factors will help improve the category going into spring including wide access to covid vaccination across the U.S., pent-up demand and warmer weather as spring approaches.
Vaccine effectiveness and distribution directly impacts the economy
The National Retail Federation issued its annual forecast, anticipating that retail sales will grow between 6.5 % and 8.2% to more than $4.33 trillion in 2021 as more individuals get vaccinated and the economy reopens. NRF Chief Economist Jack Kleinhenz said, “The trajectory of the economy is predicated on the effectiveness of the vaccine and its distribution.”
NRF President and CEO Matthew Shay said, “Retailers are increasingly engaged in working with federal, state and local health officials to distribute and administer the vaccine. This partnership has been key to our economic health throughout the pandemic and will continue this year.”
As more Americans become vaccinated, it will lead to shoppers being more comfortable with shopping in physical stores and dining out. Many consumers are making travel plans which would also drive apparel spend. One survey showed nearly 6 in 10 (57%) Americans have a trip planned for 2021. Younger consumers are especially ambitious about their travel prospects, as 68% of millennials and 65% of Gen Z have a vacation on the books, compared to 57% of Gen X and 42% of baby boomers. As soon as the first vaccine doses went out, 22% of millennials, and 16% of respondents overall, booked a trip
Barbara Rentler, CEO of Ross Stores, commented on the first quarter of 2021, stating, “With the continued roll out of vaccines, potential additional government stimulus, and likely pent-up consumer demand, we expect comparable store sales to strengthen as we move through the year.” Ross Stores plans to open approximately 60 new stores during fiscal 2021.
Warm weather days in late February and early March have already contributed to the positive sales trend. Richard A. Hayne, CEO of Urban Outfitters, stated, “As more typical weather patterns returned to the US toward the end of February, store traffic and sales in North America showed meaningful improvement. This helped to drive mid-single digit positive retail segment ‘comps’ for the month, with all brands in North America positive.”
TJX Companies, one of the largest U.S. apparel retailers, noted that despite unfavorable weather in the U.S. for the first three weeks of February 2021, the overall comparable store sales trend was better than the fourth quarter trend of Fiscal 2020 (reported at minus 3% YOY).
Buying clothes and planning vacations
Sezzle, a buy-now-pay-later solution provider, surveyed its users including 61% from the Gen Z and Millennial generations and 39% from the Gen X and Baby Boomer generations; The top categories that Sezzlers want to shop include clothing, shoes, beauty and jewelry. The survey also found that 39% of respondents plan to take 2 to 3 vacations in 2021, with 76% planning at least one vacation. Higher travel spend promotes purchasing in apparel and accessories.
Frank Conforti, Co-President of Urban Outfitters, stated early this month, “We believe, as consumer confidence improves and the impact of the virus continues to wane, the consumer will want to go out and socialize more. When they do, they will want to wear new things.”
Apparel’s slow recovery going forward
Ethan Chernofsky, vice president marketing of Placer.ai, said, “There is real reason for optimism surrounding a substantial apparel recovery in the coming months.” According to their data the apparel sector was trending closely with overall retail visits in early January before severe weather conditions throughout the country depressed visits significantly. Mall visits were also trending in a positive direction in late February. Speciality apparel and accessories stores are heavily reliant on mall shopper traffic.
Conforti stated, “February has been a difficult month to draw conclusions about traffic trends as severe weather patterns negatively impacted the North American business.” However, coming out of February, Urban Outfitters is beginning to see signs of improvement, especially in the warmer weather stores as stated in its earning call.
February starts the spring season for many retailers
February 2021 sales, which began the fiscal year for most retailers are not an absolute indicator of future performance. Fortunately there are additional the signs of a positive trend for apparel and accessories. However, the continuing unpredictable environment has led many retailers to withhold substantial future guidance going into the new fiscal year. Many COVID related factors could negatively impact shopping behavior, including the possible circulation of variants against which the current vaccines may be less effective. Most retailers have already stated in last quarter earnings calls that sales comparisons in 2021 will be made against 2019 because results in the pandemic year of 2020 are unique and therefore not suitable for comparisons.