Remember when we couldn’t get enough athleisure or pajamas?
Now the hottest question for apparel retailers is whether they have a “stock glut” – too many extra styles, sizes or colors that aren’t selling that well.
Levi’s, for example, ended up with too many jeans, Gap with too many shirts and hoodies, Kohl’s with fleece and pajamas. Nike has reduced shorts, t-shirts and sandals, and Adidas and Under Armor have also acknowledged their own inventory issues.
“We really saw it across the board,” says Brian Ehrig, partner in consumer practice at consulting firm Kearney. “We’re talking tops, bottoms, sleepwear — all of these products are getting really, really flooded.”
This is a tale of over-ordering, shipping chaos, and constant pandemic shifts in shopping habits. And it ends with full shelves, price drops and promises of great vacation deals.
Retailers are struggling to get their orders right
Every year, clothing stores walk a small tightrope, try to predict trends and order goods months in advance. The pandemic made that particularly difficult. First, in the blink of an eye, lockdowns have prompted millions of people to ditch their office attire for sweatpants and housecoats. With shoppers staying at home, malls are emptying and storied clothing chains have gone bankrupt.
Next came a shopping boom. Retail is stepping on the accelerator and ordering more and more. Then the rather sudden travel boom, in-person parties, and return to the office meant everything changed—yet again.
“A lot of things that people have worn in recent years are not the same things that they are wearing now,” says Ehrig.
Meanwhile, broadcasts from Asia have experienced many disruptions. Remember last winter’s delays and bottlenecks? To avoid repetition, many stores decided not to take any chances with this year’s holiday shopping demand, placing these orders even earlier than usual.
“No one wants to miss the holiday season, they really need this product,” says Cristina Fernández, senior research analyst at Telsey Advisory Group. “But now you have it – and you have too much. So that is the dilemma.”
For example, Nike CFO Matt Friend said the company “landed multiple seasons in the market at once” as late shipments for the spring, summer, and fall seasons arrived late, just as Christmas orders were arriving early.
No need clothing has experienced falling prices
Meanwhile, inflation has caused more shoppers to think long and hard about how much they are willing to spend on clothes.
“It contributed to a confluence of events,” says Fernández, “Retailers received some inventory late, orders that (they) didn’t really need, and then consumer demand slowed down.”
Target, Kohl’s and other retailers say higher grocery and gas prices are discouraging people from discretionary shopping — with clothing rarely seen as a necessity.
Less demand means less inflation: clothing prices have risen less than other commodities, only 4% higher than a year ago, and have even fallen in the last two months. Spending at clothing stores rose about 3% year-on-year in October and is expected to slow over the holiday season.
“I think what’s really caught[retailers]off guard is just withdrawal and changing consumer buying habits,” said Adam Davis, a managing director at Wells Fargo who works with department stores and other retailers.
Most companies, including Gap and J.Crew, have addressed their inventory concerns by lowering prices and staging sales. Some are packing away more evergreen items, like generic t-shirts, that they could sell next year. Many items of clothing also go to discounters such as TJMaxx or Ross.
Does this mean sweeping discounts for the holidays? Davis, Ehrig and Fernández all say yes, very likely. Will people decide they actually want more clothes? That’s a whole different thing.
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