Clothing stores feel sharp economic pinch

Image: Retail chain Ann Taylor
Clothing stores including Ann Taylor are feeling the pinch of the down economy.Nati Harnik / AP file

After years of routinely asking consumers what they think of the coming fashion season, it would seem that nothing could surprise C. Britt Beemer. But this year, when Beemer asked women to rate spring clothes, he got an unexpected response — 50 percent of women said they hadn’t even noticed what’s in store windows.

“That tells you how the consumer is not even focused on apparel,” said Beemer, who studies consumer behavior as head of America’s Research Group. “Shoppers, and particularly female shoppers, have just not put apparel on their radar screen.”

If rising food and fuel prices aren’t exactly getting you in the mood to hit the mall for a new spring outfit, you’re not alone.

Clothing retailers are facing a double whammy of drooping consumer interest —  fueled by economic woes — coupled with their own rising costs for raw materials such as cotton, fuel to transport goods and even labor in China.

Their problems could turn out to be more severe than other types of retailers because, for many people, a new pair of shoes or a skirt is more of a splurge than a must-have item.

“People have to eat, people have to drive to work, people have to take their medicine for cancer or illnesses that are medically mandated, but … people’s dresser drawers and closets are probably oversubscribed from prior fashion seasons,” said Burt P. Flickinger III, managing director of the consulting firm Strategic Resource Group.

Dana Telsey, retail analyst and chief executive of the consulting firm Telsey Advisory Group, thinks many apparel retailers saw weaker traffic and more cautious consumers in the first few months of the year than they were expecting.

“I think everyone’s having a very difficult time right now,” Telsey said.

Unlike in past years, Telsey said the problem does not seem to be that people don’t like what’s in the stores.

“It’s more the economy than the fashion,” she said.

The down economy is hitting a broad swath of clothing retailers, ranging from stores aimed at older women to those that appeal to trendy teens. Sales at chain stores open at least a year fell 0.5 percent in March, the weakest showing for that month since 1995, according to International Council of Shopping Centers.

Ann Taylor Stores Corp. has announced plans to close 117 stores and cut its headquarters staff, blaming the "ongoing macroeconomic weakness." Gap Inc., whose brands include Old Navy and Banana Republic, has announced plans to close 85 stores as it continues to struggle to attract customers. However, both companies have said they will have some store openings as well.

Women’s retailer Talbots Inc. recently unveiled a turnaround plan that is aimed at improving its fortunes. Abercrombie & Fitch, the teen favorite whose brands also include Hollister Co., reported weak comparable store sales for March, a key indicator of how a retailer is faring.

JCPenney, which recently introduced its American Living concept to great fanfare, also reported a steep drop in same-store sales for March. Rival Macy’s, which gobbled up and renamed many of its competitors in recent years, also has struggled with the weak economic conditions.

Still, Telsey said some stores are seeing success at getting people into stores despite the sharp rise in gas prices, a weak housing market and increasing costs for basics such as eggs and bread. Those include Urban Outfitters and its sister brand, Anthropologie, as well as athletic apparel seller lululemon athletica.

Telsey expects to see clothing retailers in general fare better in the second half of the year, as they adopt a more conservative approach that better matches consumers’ more penny-pinching ways.

But a change in approach may not solve some longer-term problems nagging clothing sellers, including overexpansion. Flickinger estimates that American retailers overall have been adding more than 1 million square feet of new selling space every year for the past 10 years, with some paying dearly for prime real estate during the recent boom years. Now some clothing companies are finding they just don’t have enough demand for all those outlets, and Flickinger expects many will be forced to scale back.

“It’s just too many stores with too much square footage chasing too few shoppers,” Flickinger said.

Flickinger also blames retailers for getting too greedy with their store-branded credit cards, hiking interest rates for profits that, he believes, are now hurting the retailers because consumers don’t have as much money to buy new clothes when they are still paying dearly for their older ones.

The jury is still out on how long Americans can go without the latest must-have shirt or new seasonal jacket. Beemer isn’t expecting discretionary spending on things like clothes to really bounce back until May 2009, after next year’s tax refunds start to kick in.

“I’ve done research for 29 years, and what I’m seeing today I can’t compare to anything I’ve seen before,” he said.

In the meantime, he expects to continue to see shoppers pull back even during times when they traditionally shop. Last year, he noted, 16 percent of people he surveyed said they didn’t do any back-to-school shopping at all. Beemer thinks they instead waited until the holidays and provided their kids with the clothes as gifts.

Flickinger thinks more Americans will make better use of hand-me-downs and secondhand stores. If there’s one bright spot for clothing stores, he said it’s that Americans’ thickening waist lines are driving some sales as more adults find their clothes growing increasingly snug.

“The only thing that, ironically, is saving the fashion industry is obesity in America,” Flickinger said.