Fashion retailers have been the worst performers in the US equity market since the US-China trade war escalated.
A number of mid-range brands like GAP, Abercrombie & Fitch (A&F), J. Jill, and Nordstrom have seen their share prices slump by nearly 40 percent over the past few weeks.
Take J. Jill, the women’s clothing and accessories retailer which had been a favorite brand for many young office ladies, for example.
Its share price plunged by 53 percent on May 30, after the company reported a 3.3 percent decline in first-quarter same-store sales. The management gave a gloomy forecast, expecting a 2 to 4 percent drop in same-store sales for the full fiscal year.
J. Jill’s share price has plunged 83 percent cumulatively over the last 12 months.
Meanwhile, the share prices of A&F, GAP and Nordstrom all tumbled, by 43 percent, 27 percent and 23 percent respectively, over the last month.
The fashion retailing sector has fared far worse than tech, chip and automaker stocks.
Part of the reason for the selloff is that most of these fashion retailers worked with factories in China, and investors are worried about tariffs pushing up their costs.
But more importantly, the brands are struggling to retain customers in the face of intensifying competition.
GAP, for instance posted a 4 percent drop in same-store sales in the first quarter. CEO Art Peck admitted that the market is very “challenging”, and he expects full-year same-store sales to contract further.
Neil Saunders, managing director of GlobalData Retail, noted that “every quarter management claims that products are improving and that the [Gap brand] is responding to changing consumer demand. And yet every season, Gap churns out the same bland range of undifferentiated product which has barely changed over the past 20 years.”
Another fashion brand A&F is facing similar difficulties. Its same-store sales rose by 1 percent in the first quarter, far below the 9 percent growth in same period of last year. Its share price has plunged by 43 percent over the last month.
The fashion sector’s woes might have something to do with reduction of consumer spending on such items.
US government data shows that Americans spent 1.3 percent less on apparel last year. It was the only category that reported a decline among all consumer products.
A survey from PYMNTS shows that millennials in America spend around US$1,950 per year on clothing, 18 percent less than those born in 1960s and 1970s.
Some retailers like TJX, however, have done better, reflecting that young Americans seem to prefer more affordable fast-fashion brands.
Given the market situation, mid-range clothing brands may need to seriously rethink their strategies to survive.
This article appeared in the Hong Kong Economic Journal on May 10
Translation by Julie Zhu
[Chinese version 中文版]
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