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| 3Q09 US Apparel Sales Report |
| 3Q Sales -2.8%; Expect Moderat |
| Dec 3, 2009 |
# Total 3Q09 Apparel Sales -2.8% — The U.S. apparel market shrank -2.8% in 3Q09, an improvement from 1Q’s -10.5% & 2Q’s -4.3%, given easier compares. Average selling price -1.1% while total units sold -1.8% in 3Q09 vs. LY.
# Mass Merchants Gain Share — Mass Merchants (21.8% vs. 20.6% LY) showed the greatest increase in market share, followed by Direct Mail/E-tail Pureplays (5.2% vs. 4.9% LY) & Off-price Retailers (9.8% vs. 9.6% LY). Department stores lost the most share (12.7% vs. 13.7%), followed by National Chains (12.7% vs. 13.5% LY) & Specialty Stores (31.0% vs. 31.5% LY). We believe Mass Merchants (WMT, TGT, Kmart, etc) & Off-pricers benefited from their strong value proposition, while Direct Mail/E-tail Pureplays (Amazon, E-bay, etc.) benefited from consumers’ preference to shop online to more easily find the best deals and lowest prices.
# Overall Full Price Selling Lower — Overall dollar value of apparel sold at full price declined as expected to 43% in 3Q09 vs. 45% LY and full price selling at Specialty Stores declined ~5% to 42% vs. 47% LY. Greater full price selling at Warehouse Clubs (+5.5%) & Children’s Specialty (+3.3%) was more than offset by less full price selling at Men’s Specialty (-14.4%), Lifestyle Specialty (-8.6%) & others.
# Women’s, 55-64 Age Demo, & Denim Better — 3Q09 apparel sales fell in all wearer segments; however, Women’s declined the least at -1.9% vs. Kid’s -3.0% & M’s -4.7%. Apparel sales surprisingly increased among the 55-64 year old demo (9.8% vs. 8.6% LY). Denim rose impressively +3.6% vs. total apparel -2.8%.
# Household Incomes Skew Lower for Off-Price — Off-Price stores had a higher proportion of lower income shoppers than Specialty Stores: 43% of Off-Price (vs. 33% in Specialty, 35% in Factory, & 34% in Department Stores) in $0-$60k range. HHI trends also validated that American Eagle and Banana Republic brands capture higher-end households (AE has 40% & BR has 60% at $75K+); while Aeropostale (47%) & Old Navy (54%) have a strong $0-75k HHI presence.
# Looking Forward — We expect 4Q09 apparel sales to decline (1)-(3)% given worries over record unemployment and increasing gas prices offset by improving consumer sentiment and net worth on higher U.S. equities, stabilizing credit market, deleverage of consumer balance sheet, expectations for smaller Y-O-Y gains in unemployment, and increases in real average weekly earnings. |
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