The overall producer price index (PPI), which measures the average change in the selling prices received by all domestic producers for their output, increased 2.3% in September, its biggest monthly increase in seven months.

The producer price index for apparel lagged the overall index for the third straight month.

Menswear producer prices rose by 3.5%, more than last month’s 3.2% increase. Women’s prices rose by .5%, a bit higher than September’s .2% gain.

Retail hiring activity at this time of year is often a reliable barometer of stores’ expectations for Holiday business. However, most of the new jobs were in non-apparel channels, like general merchandise, gifts, beauty, restaurant, toys, and electronics stores.

There was a net loss of 2,000 positions in the department, discount and chain store sector in the month, offset by a gain of 3,000 jobs in apparel specialty stores. Although department stores remain the largest retail employer, with 1.5 million jobs, apparel specialty stores are catching up, and now employ 1.4 million in the U.S. The general merchandise store sector added 6,000 positions, and now employs just over 3 million.

On a 12-month smoothed basis, retail employment rose by 1.1%, compared to 1.4% for the overall economy. Department store sector employment fell by 4.4%, compared to growth of 3.3% for specialty stores. For the past 11 months, retail job growth has underperformed the rest of the economy.

Personal disposable (or after-tax) income increased by 3.87%, its biggest monthly jump since November, to almost $12 trillion.

Total personal consumption expenditures growth increased for the second month in a row in September, to 3.8% (over the same month last year) from 3.6% in August, well above the recent low of 3.2% posted in July 2011.

Growth in consumption of apparel and footwear has been fairly stable over the past few months, increasing 5.1% on a 12-month smoothed basis in September, even with August’s increase, but remaining well above overall consumer spending growth of a 12-month smoothed 3.7%. Apparel spending growth has been slightly higher than that of footwear, but both continue to outpace overall spending.

The personal savings rate, or percent of income people did not spend, dropped to 3.3% of disposable income from 3.7% in the prior month, well off the high of 4.4% reached in June. Personal savings fell 2.7% from the same month last year, to $395 billion, its second consecutive monthly decline.

It also might mean that consumers have, at least for the time being, stopped deleveraging, or paying down debt. Total revolving consumer credit, which consists mostly of credit card debt, rose by .9% in August, more than July’s increase of .43%, and now stands at an adjusted $855 billion, an increase of more than four billion dollars over July’s level, signaling that consumers are increasingly using plastic for their increased spending, paying off credit card balances at a slower rate than before, or a combination of the two.

The 7-market average U.S. spot price for upland cotton surged briefly during the month to almost 72 cents before dropping. Prices remain about 35% below year-ago levels.

Sales grew 3.6% on a 12-month smoothed basis, (To continue reading, log in with your subscription ID and password, above right) ]]> http://apparelstrategist.com/apparel-dampens-october-retail-sales-growth/feed 0 http://apparelstrategist.com/apparel-store-sales-rise-4-8-in-october?utm_source=rss&utm_medium=rss&utm_campaign=apparel-store-sales-rise-4-8-in-october http://apparelstrategist.com/apparel-store-sales-rise-4-8-in-october#comments Mon, 19 Nov 2012 17:42:12 +0000 Judith Russell http://apparelstrategist.com/?p=4583 Apparel store sales performance picked up in October as retailers managed to close their books just before the arrival of Hurricane Sandy. Total sales rose a collective 4.8% for the top 15 retailers that still report monthly sales, better than last month, but a bit below expectations.

Sales at stores open at least a year, or same-store sales, rose a collective 4.1%, more than a point higher than Septembers 3% increase.

Teen retailer Zumiez skated to the top of the pack for the eleventh straight month with a 20% increase in total sales but only a .6% same-store sales rise, worse than the 4.5% gain expected by analysts. Buckle improved over last month by posting a total sales increase of 5.6% and a 3.8% rise in comps. Drowning specialty retailer Wet Seal saw total and same-store sales plunge yet again, marking its seventh straight month at the bottom of the pack.

Gap, well into a turnaround, had its fourth straight month of sales gains thanks to dramatic improvements in the North American businesses, even though the 4% increase in same-store sales fell short of expectations. Total sales increased by 7%, to $1.45 billion.

Off-pricers Ross Stores and TJX were again among the biggest total sales gainers for the month, as they continued to offer customers high quality and department store brands at discount prices. Ross saw total sales climb 8.2% to $715 million for the month, while TJX also beat expectations with a total sales gain of 10.5% and a same-store sales increase of 7%.

Department stores posted better-than-expected results, for the most part. Stage Stores delivered an upside surprise again in October, with total sales up 10.8% and comps gaining 6.5%. Macy’s beat expectations with total and comp sales increases of 3.6% and 4.1%, respectively. Kohl’s also exceeded plan with a 4.6% increase in total sales and a 3.3% jump in comps. The Menomonee Falls, WI-based retailer announced it would stop reporting monthly sales in early 2013.

Nordstrom, the only high-end department store to still report on a monthly basis, had an excellent month, with total sales up 11.5% and comps rising an impressive 9.8%.

Limited Brands turned in a disappointing same-store sales gain of only 3%, its lowest in several months, and a drop in total sales of 6.3%, due to the continuing negative effect of the sale of its third-party sourcing business.

Target failed to meet estimates with total sales up by 3% and comps ahead by only 2.4%. However, much of Target’s sales are in non-apparel. Taking the impact of Target out of the results, total sales rose 5.9% and comps jumped 6.5%. The discounter will cease to report monthly sales results after January 2013.

The overall producer price index (PPI), which measures the average change in the selling prices received by all domestic producers for their output, increased 2.1% in September, its biggest monthly increase in six months.

The producer price index for apparel lagged the overall index for the second straight month.

Menswear producer prices rose by 3.2%, much less than last month’s 5.5% increase. Women’s prices rose by .2%, reversing August’s .2% decline.

To download historical PPI data files, click here. Historical data files are available to premium subscribers only. Not a subscriber? Click here to order a subscription to ApparelStrategist.com.

(ApparelStrategist.com executive editor Judith Russell reflects on the state of bricks-and-mortar retailing.)

On a recent afternoon I spent 20 minutes doing errands that a year or two ago would have taken me about eight hours to do.

Instead of jumping into my SUV and taking multiple trips to various big box and discount stores in my town, I strolled into my home office, powered up my trusty PC, and “went to town” in a different way. With a few clicks of a mouse I bought two or three carloads’ worth of stuff ranging from garden tools and patio furniture to office supplies and groceries.

Most of my purchases were made on pure-play e-commerce sites. Comparison shopping helped me get very good prices and free delivery. One category of merchandise failed to figure into my flurry of e-consumerism, however: I did not buy a single stitch of clothing.

I am one of those people who prefer to shop for clothes in brick-and-mortar stores. I need to see, feel and try on clothes before I buy them to make sure they fit, look good and meet my quality standards.  I do not trust computer monitors to accurately display important details like fabric, color, drape or weight.

It turns out I am not alone in this. According to e-commerce intelligence firm eMarketing, total U.S. e-commerce sales rose to $200 billion last year, or 7 percent of the total retail business. It is estimated that the portion of total apparel sales purchased online is much smaller –- by some estimates only 5 percent. Making matters worse, returns of online apparel sales are as high as 40 percent for some retailers.

Online apparel sales, though growing, remain a relatively small part of the business because consumers need to touch, see and try on. Sucharita Mulpuru, analyst with technology powerhouse Forrester Research, feels that “the in-store experience remains a critical part of the buying process for discretionary items like apparel.”

The exception to this, according to Mulpuru, is flash sale sites like Gilt Groupe and Rue La La, which continue to enjoy meteoric growth. There, the spontaneity afforded by the Internet is the experience, and customers are all too willing to forego trying-on for the thrill of the hunt.

I recently asked a group of trade show seminar attendees, most of whom were under 40, if they were frequent online shoppers of apparel. To my shock, no hands went up. I then asked (to make sure they were listening) how many hated shopping for clothes online. All the hands went up.

The problem, they were only too happy to explain, is that unless you already know that a brand looks good on you, and what size you wear in that brand, and the fabric quality standards of that company, your chances for dissatisfaction with an online clothing purchase are pretty close to 100 percent.

One woman told me, “It takes all the fun out of clothes shopping. I look forward to coming out of the dressing room and hearing the feedback from others. I like to have the cashier wrap up my purchase in tissue paper and place it in a nice bag and hand it to me, and then get to walk around carrying the pretty bag. Internet orders arrive in cheap plastic bags in cheap brown paper envelopes.”

One man in the group told me that “Although buying clothes online seems convenient at first, once you find out the item doesn’t fit, you have to pack it back up and haul it back to the post office, or call UPS for a pickup. Suddenly it’s not so convenient anymore.”

And forget about impulse purchases. Another attendee was turned off by the lack of inventory during a recent trip to a Gap store. “I needed a pair of khakis for an event that night,” he complained. “They had three pairs of khakis, which of course were all extra large. The sales clerk told me I could order my size online in the store for free shipping to my house. That didn’t help me, since I needed them right away.”

Despite complaints by the many industry and lay people I read about and talk to, though, e-commerce is an increasingly important focus for apparel companies. Every major apparel retailer is crowing about its double-digit online sales growth. According to eMarketer, although apparel lagged for years behind other categories in online sales growth, it’s now growing faster than any other e-commerce product segment. Over the last four years, online apparel sales growth has accelerated — from 10 percent in 2007 to over 20 percent in 2011. Some industry experts are forecasting that it will represent almost 20 percent of total apparel sales by 2016.

However, the growth numbers don’t tell the whole story. Just because a consumer buys a product online doesn’t mean he or she didn’t see it in a bricks and mortar store first. Perhaps the store didn’t have the desired size or color, so the shopper ordered in online – maybe even from his or her smartphone while still in the store. Or the consumer found the item at the store initially, tried it on, and loved it, but waited until it went on sale to order it — online. Or perhaps after discovering the product at one store, and “showrooming,” (using a mobile device to search the web for a better price while shopping) – she bought it elsewhere. Since it’s virtually impossible for stores to track this kind of activity, they credit their increased e-commerce sales to exceptional website design, rich customer e-mail lists, and cutting-edge social media.

What’s particularly disturbing to us brick-and-mortar loyalists, however, is that as online sales grow, many apparel retailers are beginning to reduce their store count and average store size, making the in-store experience less compelling.

One mall developer (who requested anonymity) said there isn’t a major specialty store chain today that isn’t frantically trying to cut its total physical footprint. “Everyone’s desperate to cut expenses, and store occupancy and labor costs are the biggest line items. Right now I’m being asked to renegotiate leases even before the term is up. We don’t want to lose important tenants, so we’re being forced into flexibility and concessions we wouldn’t have dreamed of five years ago.”

Specialty chains Gap, Old Navy, Ann Taylor, American Eagle and Destination Maternity have dramatically reduced their store count over the past two years. Last year Ann Taylor reduced the square footage of almost 20 percent of its stores by 30 to 40 percent, a project it plans to continue in the next couple of years. Many department stores are doing it as well, citing the need to “localize.”

The apparel market isn’t growing, so its brands and retailers can only increase revenue by taking share from competition in what is arguably the most competitive environment in the history of soft goods retailing. The successful ones do this by staying top of mind with their target customers, by delivering their offerings faster, better, cheaper and with the best customer experience.

Instead of investing in a compelling in-store environment that engages consumers in an emotional, neurologically connecting way, some retailers are making the mistake of trying to do too much with less. They’re cutting store-level inventory (assuming customers will order out-of-stock colors or sizes online while still in the store), making stores smaller, and moving away from the in-store merchandising techniques that really enhance the shopping experience. Many are claiming that since e-commerce is their fastest growing channel (even though it’s still a very small portion of sales), they’ve chosen to invest more into web stores and online technology and less in store design, rent, store labor and all those tangible elements that contribute to the in-store experience. This is a shortsighted and very dangerous direction. When consumers spend the time and gas to visit a store, they want it to be worth it, or they might not come back. The in-store experience enhances the brand proposition for all customers, regardless of whether they prefer online or in-store shopping.

Are more consumers buying online because they want to, or because they have less choice? Are apparel retailers reducing their physical selling space because of the consumer’s preference toward e-commerce as a shopping channel, or is this a financial strategy in search of justification?

Are brands prematurely pushing the consumer to e-commerce by closing some stores and shrinking others?

If so, then this strategy could backfire in a major way, tarnishing brands and sending customers to the competition faster than you could click a mouse.

Only about 15 retail companies – a small minority of the publicly-held merchants who sell discretionary consumer products – report their total and same-store sales on a monthly basis today. This is a sharp decline from 5 years ago, when virtually all publicly-held retailers reported.

Many of them stopped reporting because it was “causing too much volatility in stock prices.” (I guess we should thank them all for reducing the volatility in the stock market.) Others claimed it was “causing management to focus too much on the short term and not enough on longer term initiatives.” Whew. Thank goodness they nipped that problem in the bud, too.

To really grasp how insignificant same-store sales figures have become, let’s consider for a moment the companies who no longer report. Walmart, the largest retailer in the country, representing half of all retail sales, stopped reporting in early 2009, after the news got so bad month after month that someone in Bentonville finally figured out they were important enough to not have to share it anymore. Quickly following Walmart’s lead were Sears, most of the regional discounters, and the dollar stores.

In the past couple of months, JCPenney and Saks have stopped reporting as well. Kohl’s and Target have announced they will stop reporting early next year.

Stealth giant Amazon never did report same-store sales. I guess it’s because they don’t have stores. But they certainly do a lot of sales – sales that used to be done by stores.

In the women’s specialty apparel sector, we know how Gap, Limited Brands, and Wet Seal are doing, and that’s about it. About the other major players, like Ann Taylor, Talbots, Chicos, Express, Urban Outfitters, Dress Barn, Charlotte Russe, Charming Shoppes, Christopher & Banks, New York & Co. – we learn nothing.

And it’s not just the women’s merchants who are remaining mum. There’s no news from Men’s Wearhouse, Joseph A. Banks, or Casual Male, either. Throw in Children’s Place, Abercrombie, American Eagle, American Apparel and Aeropostale to that list while you’re at it.

So what are we left with? The department stores, off-pricers, and a couple of teen retailers. Some big stores, to be sure, but representing less than 25% of retail sales, making it impossible to glean from the data whether the market’s growing or shrinking, or which retailer or channel is gaining share from another.

Complicating the situation even further is the fact that some of the big stores, like Macy’s, Penney and Nordstrom, have started to include their e-commerce sales in same-store sales. With online sales growing by double digits, all this does is introduce even more confusion and insignificance to the measure.

I have therefore concluded that those companies who still report monthly same-store sales should just stop. Macy’s, Gap, TJX and friends should just post their comps every quarter like the rest of the market does. At least we’ll have something meaningful to look at, especially considering the profitability figures that come along for the ride. It would also give us all an extra day per month – if not more – to do other things, like focus on longer term initiatives.

Or spend more time watching George Clooney movies.

(This editorial was originally posted as a guest blog on RobinReport.com.)