Wells Fargo Finds Apparel On The Upswing

By Retail Dive

This article was published in Retail Dive May 5, 2021. We're sharing because it discusses how the apparel industry is beginning to see a rebound, making note that many retailers have turned to smaller inventory lines.

E-commerce has slowed and stimulus checks are dwindling, but the analysts found that store traffic is up, inventory is lean and margins are fatter.

Apparel sales growth was already on the decline when the pandemic took a sledgehammer to normal day-to-day life — and any reason to buy new clothes.

With signs that the outbreak is easing across the U.S., several clothing retailers and brands have cause to celebrate for a change, according to new research from Wells Fargo analysts led by Ike Boruchow.

"The retail recovery remains in full swing - with accelerating trends since mid-March, material [first quarter earnings] beats, and bullish outlooks from management teams across the space driving increased investor optimism," the analysts wrote in a May 4 client note.

Challenges Remain

The sector hasn't reached easy street by any means.

For one thing, the pandemic relief that has lifted so many retail companies in the past several months is dwindling. For another, e-commerce, a notoriously difficult way to sell apparel thanks to the tendency to return items, exploded last year.

Among the 65 retailers tracked by Wells Fargo, online sales in categories like apparel flattened in recent weeks with stores and malls open and more people out and about. They found that online growth actually fell during April, probably because relief checks were running out and due to comparisons to what was an unusual 2020. But a portion of the shift