Q: Since it’s January I’m making plans for the rest of the year. Which metrics should I focus on to measure how well my business is doing? We had a strong 2022, up about 10%. Although I know the economy is cooling, I still want to set some optimistic goals. What do you recommend?
A: What a year 2022 was for menswear — we can all take in a big breath of fresh air. There were so many high points: Doing more with less for the first half of the year, hitting margin levels we have only dreamed of, and customers not batting an eye at higher price points.
That said, this year will be quite different as the sales curve comes down. The metric I am most concerned about is margin. Men’s stores raised their margin levels by about 3% to 4% on average last year, and this was on gains the previous year.
These gains helped us build our rainy-day reserves, and in some cases, we just took the profit and ran. So, as promotions and markdowns begin to normalize how are we going to go back to last year’s margins? We have gotten accustomed to making more, and in many cases, stores are budgeting higher margins for the future.
But at the same time, inventory levels are building to 2022 levels. This situation will lead to margin spill if it continues. You need to budget your ending inventories down to force sell-through and keep markdowns in control. Don’t forget that budgeting ending inventory down is just one part of the strategy — you also have to manage your open-to-buy to meet the plan. This step will help you bolster your margin. Think of margin as the blood of your business.
Another point to remember is that sales took off like crazy last year with low inventory. We learned that if you starve the customer they will buy. This strategy can also help boost margin.
Photo, top: Efrem Efre.