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Do Retailers Still Have Too Much Apparel Inventory?

If the slow back-to-school selling season for apparel is any indication of what’s to come, many retailers may have already over-bought for winter and holiday and now have too much inventory on their hands.

Retailers regrouped at the start of the coronavirus outbreak and either canceled or pulled back on apparel orders, staying fairly cautious on what they bought for the balance of 2020. And while it made sense to pull back on wear-to-work items like career tops and bottoms and high-heeled shoes, there’s also the chance retailers bought too much athleisure in an effort to bring newness into the fashion component of their sales mix. That means apparel brands could continue to see weak demand for months to come, and maybe even for the next several quarters.

The problem isn’t really the fault of the retailers. Many say they see the benefit of leaving some sales on the table to keep inventory levels lean and avoid having too many markdowns at the end of the selling season. But as the progression of the Covid pandemic has shifted, so too has the spending patterns of consumers as they react in turn. And it’s not like anyone has a playbook that they can check to find out what comes next. While retailers have been getting better at understanding the shifts and adapting to them, they’re still in the position of needing to change course quickly, even if that means that what’s working in one locale needs to be adjusted across the country because of a Covid-19 spike.

Back-to-school is typically the second-largest selling season after holiday. And for the longest time, it’s often the barometer determining what could be coming up on deck for the holiday selling season. That’s not to say holiday will be a lost cause because many categories will be doing well, just not apparel.

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Retail therapy during Covid has been real, and consumers will likely indulge in products they will use now, [such as] electronics, kitchen appliances, and desk and office products.  We anticipate a lift in at-home or cold weather activities, toys, and games, as consumers consider how they can stay entertained throughout the season, while apparel sales outside of athleisure will likely trail last year,” said Katie Thomas, the lead at Kearney’s Global Consumer Institute.

And right now there’s speculation that retailers could have another apparel inventory problem on their hands, hence the extra discounts starting now to move goods out as retailers compete with Amazon’s Prime Day sales.

Women’s specialty chain Talbots has been running different sales in the past week. One was a discount on all new arrivals, followed by another just on the purchase of one new item. The most current promotion through Monday on new arrivals for fall is essentially a shopper’s choice: 50 percent off three or more items, 40 percent off two items or 30 percent one item. Macy’s Inc. is hosting its “Fabulous Fall Sale,” giving buyers an extra 25 percent on select items, plus $10 in Star money for rewards members. And Kohl’s Corp. is hosting a series of specials on its site, with purchases qualifying for Kohl’s Cash. That company cash incentive, $10 for every $50 spent, is designed to entice consumers back for another round of purchases. And J.Jill, which just completed a deal on its financial restructuring with lenders, is offering shoppers $50 off any purchase totaling $150.

Deals aren’t limited to just apparel retailers. Footwear firm Clarks is giving shoppers 30 percent off on purchases of $100 or more, although it’s also been offering varying discounts since the summer.

“We know that BTS was lousy, and even right now sales are not that good. I think spending for fall and winter apparel will be very conservative, which could lead to retailers having too much inventory. One huge problem is that we’re seeing the effect of what’s called a second wave, at least in parts of New York City, and eventually those increases could impact the whole city,” Walter Loeb, a former Wall Street analyst and now consultant, said.

And when asked in a UBS Wholesaler Buyer survey if Fall/Winter sales have been more or less as they thought it would be, respondents said “sell-through has been less than expected,” according to a report on the survey by Jay Sole, U.S. softlines retail analyst at UBS. “The implication is that demand is weaker than anticipated and now retailers may have too much inventory,” Sole said.