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Not so long ago, the apparel retail sales scenario in the US and EU was no less than extraordinary. The US had seen apparel retail sales surge by 13.76 per cent to US $ 81 billion in January to April period, with clothing imports growing by 40.55 per cent to US $ 32.43 billion.

It was no different in EU, where apparel imports went up by around 30 per cent to € 21.70 billion in the same period.

However, things haven’t been so rosy in last two months – be it at a department store, specialty store or hypermarket.

In May ’22, volume-wise, the US imported 2,772.93 million SME worth of garments, while the same was 2,763.30 million SME in June ’22 – noting 0.35 per cent decline on monthly note. In value terms, the imports valued US $ 8.64 billion, up by 1.52 per cent over May ’22.

That’s distinct enough to indicate that the US buyers reduced sourcing in June ’22 for basic low-cost products as compared to May ’22 to save themselves from piling up inventory.

The fact of the matter, however, is that inflation is very high in the US and Europe – owing to political and economic crisis – and shoppers are spending more on food and fuel. Simply put, consumers are spending less on clothes especially in last two months. Less purchase is enough to get the stocks piled up at every store – be it a department one, specialty or hypermarket one.

In fact, inventory-pile up has actually compounded the miseries of the retailers even as holiday season isn’t far away. While placing too many orders may leave them with no choice other than offering heavy discounts post holidays, less orders will obviously push the shoppers towards rival retailers – not to mention the monetary losses that the businesses will face.

The situation is so tricky today that any aggressive stand on inventory could hit the retailers significantly.

Apparel sales have been dismal at big box retailers Walmart and Target which in July 2022 announced slashing of prices on some products to move through the inventory, particularly apparel. Target saw its profits in Q2 ’23 (May 1-July 31) being hit badly after it slashed prices to clear out a glut of unwanted inventory.

According to National Retail Federation (NRF), after a record-setting Spring, imports at the USA’s major container ports are expected to slow significantly for the remainder of the year, but 2022 should still see a net gain over 2021.

“Retail sales (collectively of all commodities) is still growing, but the economy is slowing down and that is reflected in cargo imports. Lower volumes may help ease congestion at some ports, but others are still seeing back-ups and global supply chain challenges are far from over,” commented Jonathan Gold, NRF Vice President for Supply Chain and Customs Policy.

Target is also deciding in some cases to pack away merchandise to sell at full price in the future and in other cases to promote.

Yes, rather than trying to sell through all the excess goods at lower prices right away, some retailers are packing away items for sale at a later date. This strategy was once used by the well-known department store chain T.J. Maxx, and is now getting adopted by many others. Kohl’s Corp., yet another department store chain that currently has 40 per cent more inventory than what it had a year back, is also packing away pajamas and fleece that arrived late with hopes of selling them in the Fall.

It’s not been easy for specialty retailers as well! Capri Holdings has been taking an aggressive view of holiday inventory. As per its Q1 ’23 (April 2-July 2) report, the net inventory was US $ 1.265 billion on 2nd July 2022, a 66 per cent increase compared to the prior year. Relative to pre-Covid levels, first quarter inventory increased by 25 per cent.

Higher inventory was planned reflecting the company’s new programmes to receive seasonal merchandise earlier as well as hold more core inventory. Management expects inventory levels to be below prior year by the end of FY ’23; however, the company anticipates that any greater (and ongoing) supply chain disruptions could further extend inventory delays or cause an increased inventory level due to less purchasing in the market.

The same story continues in the UK too! Though UK businesses have been finding freight rates slumping and supply chain troubles easing, the consumer demand too has been waning equally.

Sainsbury’s, the UK’s second-biggest hypermarket, has revealed that sales at established stores have fallen by 4 per cent Y-o-Y in the 16 weeks to 25 June 2022. This includes 10 per cent drop in clothing sales. Many Sainsbury’s shoppers have tried to offset inflation by switching away from big brands rather than buying significantly fewer items.

In its efforts to reduce the cost, Sainsbury’s is now investing £ 500 million and doing everything possible to bring the prices down – especially on the products customers buy most often. Another hypermarket Asda said that one-fifth of UK households had negative income in June 2022 and therefore it has been offering lots of discounts on apparels to clear stores’ inventory before going cautiously for holiday season’s sourcing.

Even as inflation is tightening its stranglehold across the US and Europe, some of the major garment hubs like Bangladesh and India are feeling the heat! Bangladesh’s textile industry is presently facing major challenges owing to the global recession and inflation as retailers in both European and US markets are either deferring the shipments of finished products or delaying orders.

Here it’s important to state that the European Union accounts for nearly 60 per cent of the Bangladesh’s garment sales, while the US makes up around 20 per cent. Both economies have been gasping for breath on the cusp of a recession that would pump the brakes on any post-pandemic revenge spending.

Although Walmart’s slashed earnings’ outlook is ringing alarm bells for Bangladesh, which hugely depends on garments for 80 per cent of its exports, the warning signs were already there, said Faruque Hassan, President, Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

It’s no different for India too! Indian textile producers have also been witnessing initial signs of a demand slowdown as high energy and food prices have weakened the demand for products such as curtains and bedspreads in the top export markets of the US and Europe, said Indian Textiles Secretary Upendra Prasad Singh. While apparels have been hit to some extent, it’s been worse for home textiles as the latter is more price-sensitive than former.

In May ’22, Bangladesh’s shipment to USA was 280.86 million SME that increased marginally to 282.49 million SME in June ’22, noting a meagre 0.58 per cent growth on monthly basis. On the other hand, India’s shipment to USA in volume terms reduced to 138 million SME in June ’22 from 163.89 million SME in May ’22. The figures are alarming as one can see a clear downfall and fluctuation in the export volumes of India, while Bangladesh that had been growing in double-digits till April has seen an arrested growth level from May ’22 onwards.

But every cloud has a silver lining! Supply chain troubles are slowly easing, which might benefit everyone in some way. Also, with several countries adopting China-plus-one-strategy and many more free trade agreements coming up, there’s hope. A lot will, however, now depend on how the political and economic situation unfolds across the globe in the months to come.

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