HOW WILL INCREASED TRADE TENSIONS AFFECT THE APPROACHING MARKET SLOWDOWN?

by Steve Pruitt Aug 16, 2019

Q: You’ve talked before about how we are finally at the end of a long expansion period and starting to see a slowdown. How will the recent increased trade tensions affect this slowdown, particularly for apparel merchants?

Steve Pruitt: It will affect us. The degree of the slowdown will depend a lot on politics. As menswear merchants, we are caught between Trump and China, and Trump and the Fed. If the economy continues as it has been, the landing will be soft, albeit long (probably through the presidential election). If international affairs push down U.S. growth, it could be a harder landing.

We already know that business in July was very challenging. If you’re in a resort or tourist area, business was probably okay, but if you’re in a suburban setting it may not look so good.

Here’s a relevant question: Was business in July soft as a result of customers traveling (travel/experiences), or are customers saving for a rainy day? Right now, it’s too early to tell. At this point, I think it is 50/50.

So, what do we do? The first response has to be a focus on margin. If we can’t pick gross profit from the top line, we have to look at margin percentage increases.

Here are a few ideas on how to do this:

1. Higher sell-through.

If there is less to markdown we increase the maintained margin. The only clear path to higher sell-throughs is tighter buys and better content.

2. Increase the in-season buys.

This will open the door for off-price and/or buybacks to fast selling full-price transactions.

3. Focus on Made-To-Measure (MTM).

This is a high-margin business that builds client retention. And don’t forget to go back for a second helping after the MTM transaction is complete (ask what else they need).

Lastly, ask yourself the question: “What is the cause of lost sales?” I would suggest the answer is missing sizes. Here’s a remedy: Narrow the presentation by 5 to 10 percent and buy deeper into winners. And, to address the last issue, ask yourself how to pick more winners.

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