August 23, 2004-- Home Textiles Today,
More full-priced selling, fewer markdowns — this can't be American retailing, can it?
Apparently, it is. According to the quarterly retail results flooding in over the past two weeks, many retailers have moved away from a heavy emphasis on price-pounding, promotional selling. (Not that prices aren't being pounded on the wholesale side, of course.) Heck, even Kmart's gross profit margins jumped 26 percent.
There are common themes emerging from many of these reports: more fashion, more trend-right goods, more timely arrivals and cleaner sell-throughs.
More important, most retailers said that back-to-school is off to a rip-roaring start.
Ah, but look at the inventory numbers. Although many retailers made a point about inventories being just right, the general trend shows they're getting heftier.
Only Target Stores owned up to part of that increase coming from the stepped-up pace of direct importing (its inventories were up 20 percent in the second quarter, with about half the increase coming from direct sourcing,) but one has to assume that the practice is a contributing factor elsewhere.
Which once again raises the question we so love to ask around here: How much of a bellyful can retailers comfortably hold? (Personally, I think we'll begin to get an idea about a year from now. A few quarters of noshing at the quota-free banquet will demonstrate who can handle the rich stuff and who can't. But I digress.)
While the bright retail outlook came as welcome news all around, it was harder to square with the consumer confidence numbers released last week. The leading index fell in July by 0.3 percent, the second consecutive decline. And the weakness in the last two months was widespread.
The Conference Board, which assembles the data, noted that it is too soon to conclude that the declines mark the end of the upward trend that has been under way since March 2003. But the weakness has slowed the growth rate of the leading index into the range of 1 to 2 percent (annual rate).
In addition, the Conference Board pointed out that real GDP growth slowed to a 3 percent annual rate in the second quarter, down from a 5 percent average rate over the preceding four quarters.
Are retailers being too quick to slap on the rose-colored glasses? Not necessarily. Because although only four of the 10 indicators that make up the leading indicator number increased in July, the index of consumer expectations was one of them — and its increase was outstripped only by the increase in new building permits.
If that holds up, the industry just might find itself enjoying some more full-priced selling and fewer markdowns in the second half of the year. Wouldn't it be loverly?
Related Content By Author
Previewing Heimtextil 2017