Consumers are finally starting to swap sweatpants and tees for dresses and suits; Tourism could be the next boost for some apparel brands
Among Gap’s portfolio of brands, Banana Republic, which sells dressier, work-relevant clothing, saw a 24% increase from a year ago in the quarter ended April 30, while selling for a more value-for-money, comfort-focused Old Navy declined 19%, compounded by the self-inflicted inventory crisis. Sales of women’s suits, dresses and skirts rose 62% in Banana Republic, while sales of men’s suits nearly doubled. Urban Outfitters outperformed its more expensive brands, Anthropologie and Free People, last quarter than its namesake brand, which caters to younger shoppers.
A similar dynamic played out among department stores. Macy’s sales of its luxury department-store chain Bloomingdale’s rose 27% last quarter, compared to 10% at its namesake chain. Macy’s Chief Executive Officer Jeffrey Gennett said on an earnings call Thursday that luxury sales were a “standout” for the business, noting that shopping among high-income consumers has so far been less affected by inflation. nordstrom,
Another luxury department-store chain saw sales jump nearly 19% for the quarter ended April 30, nearly double the profit surveyed by FactSet.
It’s not entirely surprising that higher-earning consumers – who were more likely to work remotely during the pandemic – are now shopping for clothes that fit their travel, socializing and back-to-office plans. go together. With hybrid working arrangements likely to become the norm for office workers, returnees can splurge on fewer but fancy items.
Stores at that higher price point have been able to beat inflation better. Ralph Lauren said its average unit retail — or average selling price — rose 13% last quarter compared to a year ago, as it had already risen 31% in the previous year. That price increase helped the company “more than offset” higher-than-expected sea freight costs, according to Chief Financial Officer Jan Nielsen. Conversely, while Abercrombie & Fitch posted better-than-expected sales, the company still showed a net loss as it dealt with higher freight costs.
There could be more jumps. While office occupancy has recovered since Omicron’s outbreak, it has remained at around 43% pre-pandemic levels, according to Kastel Systems. The Wedding Report, a research company that surveys the wedding industry, expects a record number of weddings to take place in the US this year.
As more consumers start traveling, apparel sellers who rely more on tourist traffic may also see higher gains in the coming quarters. Checkpoint trip numbers from the Transportation Security Administration are recovering, but have not yet returned to 2019 levels. Macy’s said its department stores are beginning to benefit from international tourist traffic — notably flagships in Herald Square in New York and Union Square in San Francisco.
Historically, Macy’s Inc. 3% to 4% of the business has been international tourism. According to a research note by JP Morgan,
Tourists accounted for 10% to 15% of North American brick-and-mortar revenue at the Ralph Lauren PrePendemic. Tourists make up about a fifth of the global sales of Michael Kors owner Capri Holdings and 30% to 40% of US revenue at Calvin Klein owner PVH, according to JPMorgan.
Some upscale apparel brands still sport very attractive valuations. For example, Ralph Lauren shares gain about 1.1 times ahead of 12-month sales, or 26% below the 10-year average. On the same basis, Capri Holdings is valued at about 48 per cent below its 10-year average. Unlike the clothes that adorn their racks, there are still some deals to be found.
Jinjoo Lee at [email protected]
Credit: www.Businesshala.com /