ActionWatch Update

As posted in Transworld Business, the ActionWatch Retail Panel (same-store set) reported apparel sales were 23% lower in Q1 2009 compared to last year’s first quarter. However, the average inventory level in Q1 2009 was almost 8% higher than it was in the previous year. While all categories tracked showed decreased sales for the period, apparel was the only category that also had increased inventory levels. That is, retailers on the panel seem to be managing inventory levels of their other categories more closely to sales patterns.

What does this mean for the second quarter? Unless we see a big turnaround in sales (which is unlikely), many retailers will need to apply more discounts to turn their old inventory fast enough to be able to replace it with fresh goods. Of course, the discounts will probably be combined with lowered orders from suppliers, but we’ve already been hearing about that from the industry’s public companies.

Not everything is bleak.

April same-store sales for the core shops on the ActionWatch Retail Panel showed the best year-over-year numbers we’ve seen so far in 2009. After two months of being down more than 19%, it was a relief to be down only 14% in April 2009 compared to last year. Apparel showed the best improvement with a sales decrease of only 10% compared to being down almost 25% in the previous month. Also, retailers’ margins on apparel sales have steadily improved over the last three months although April’s 46% apparel margin was still two points lower than last year.

When drilling down into apparel classes, we find boardshorts sales were actually up over 4% compared to last year for the men while ladies’ skirts continued their sales increase streak to flirt with actually becoming a meaningful category in core shops. However, although I don’t want to be a downer, we have to consider that April’s sales improvements could be partially due to Easter moving from March last year to April this year. Even so, April’s numbers provide some hope that we might have hit the bottom and are now working our way back up.
– Cary Allington