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When Will Sluggish Wholesale Sales Normalize?

Expectations keep getting worse for apparel firms.

As brands work on projections for 2021, most should plan for a slowdown in sales growth—at least for the first half— largely due to lower sell-throughs for Fall/Winter 2020 items.

“Retailers are still cautious with their orders,” Walter Loeb, a former retail analyst and now consultant, said. He explained that there are still many unknowns, primarily centered around the coronavirus. “I believe that the cautiousness will continue into the first and second quarters of 2021 because no one is sure about the shopping habits of their customers. Assuming we get some virus vaccines that can be more widely distributed in the second quarter, the third quarter is when we will more likely see sales begin to normalize for the year.”

Retail’s fourth quarter ends in January, with the first quarter of 2021 beginning in February.

Loeb expects apparel wholesalers and retailers will focus more on basics and staples, “so as to avoid any markdowns later in the season.” Too many basics could be a problem if consumers are on the hunt for something new and more fashionable to add to their closets. That was a problem that surfaced for many companies during the Great Recession in 2008, and was blamed for the poor performance in most apparel categories.

“To some extent it’s risky, but at the same time basics will carry forward to another season, without any markdown. The ‘little black dress’ that’s selling now can probably be sold 10 months out of the year,” Loeb reasoned.

In the 6th UBS Evidence Lab Wholesaler Buyer survey, responses indicate that “wholesale apparel buyers are planning Spring/Summer 2021 orders down in the low-single-digit range” year-over-year. That’s a shift from the prior (pre-Covid) surveys from September 2019 and February 2020 when buyers were planning orders up in the low- to mid-single digit range. The online survey of 193 wholesaler buyers in the U.S., U.K., France and Germany was conducted in August and September.

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“We note U.S. buyers are more pessimistic than European ones are,” Jay Sole, UBS softlines retail analyst, said, noting that slower sell-through of Fall/Winter 2020 items could be one reason why buyers are taking a “cautious approach” on orders.

One brand that was doing better-than-expected for Fall/Winter was Levi Strauss, which had wholesale buyers more optimistic about a strong sell-through trend for Spring/Summer 2021. However, brands such as Ralph Lauren, Tommy Hilfiger and Calvin Klein didn’t fare as well. Among the European brands, buyers expected orders to be down for most brands. Gucci was cited as an exception and could see higher orders than its European counterparts, which include Hugo boss, Burberry, Prada and Armani.