As expected, the summer flew by with nary a mention by the marketing trade press of the sorry state of the U.S. economy, which – for four years now – fires on just a little over half its typical GDP “cylinders.” Into the breach steps the larger business press, which has apparently uncovered a new “new new new normal.”
>>> Consumers are no longer buying clothes so they can buy cars and home improvement items.
It started with Macy’s, which in mid-August reported lower comp sales performance for its latest fiscal quarter thusly:
“We believe that much of our weakness is due to the health of the consumer and the fact that consumers seem to be choosing to make purchases in non-department store categories such as cars, housing and home improvement.” [emphasis ours]
Target then picked up this theme a week later in its quarterly earnings call:
“And while emerging strength in housing and automotive sectors is a long-term positive, the near-term spending of these big ticket items is crowding out other spending.” [again, emphasis ours]
On the heels of these heels came Citi analyst Deborah Weinswig, who termed the faux economic trend “C.H.E.A.P.” – for cars, housing, e-commerce, appliances and home projects. No clothing or apparel in this set of purchases.
Then came the teen tsunami – Aeropostale, American Eagle, and Abercrombie all taking a sales nose dive in their recent fiscal quarters. Others were then thrown randomly onto the “no more clothes” pile – see Walmart and Kohl’s, for example – simply for lowering year-end forecasts.
Yet, there was Gap. And T.J. Maxx. And Ann (the old Ann Taylor, rebranded as we told you here). And Guess (formally known as GUESS?). These companies didn’t get Macy’s memo. All sold clothes like they were, er, going out of style. Comp-sales percentage increases in the mid-single digits and higher.
They weren’t “CHEAP”ed, because it doesn’t exist.
- Cars: U.S. auto sales have been on a steep climb since their last small trough in September, 2011
- Housing: Sales of previously owned U.S. homes fell for the second straight month in July…that’s some housing recovery, eh?
- E-commerce: Nonstop growth since roughly 1994
- Appliances: This category was the biggest underperformer in the most recent quarter for Sears, which has the leading (29%) share of U.S. appliance sales
- Home Projects: We’d love to share Home Depot’s and Lowe’s enthusiasm for the sustenance of pent up demand, weather disasters, and Blackstone home flipping (note that 50% of homes purchased in the past 18 months have been paid for 100% with cash), but we think each will be guiding analysts back down later this year
So, if the economy is not “crowding out apparel sales,” then what happened at Gap or Guess or Ann that didn’t happen at Macy’s?
In Part 2 of this post tomorrow, we’ll take you through the most recent earnings call transcripts of the apparel winners, as well as that of Macy’s, to prove it.