Summary

Mark and Marni of the Retail Tracker focused their call on the changes in the fashion cycle and the effects of Covid and inflation on spending habits of the consumer. They began with a review of the retail sector in 2021. Whilst the general performance for 2021 was positive for Retail, Covid still had a significant impact in the first 2 quarters of 2021, particularly in the US.  

More recently inflationary pressures have been affecting both the consumer and the Retailer with regards to demand and prices. With fewer stimulus checks the consumers have a decreased income, albeit offset by those who are now employed instead. Combined with a return to normal life generally speaking for the Consumer, there is a greater focus on value when it comes to retail purchases. For retailers there are increased costs of supply, specifically to do with issues of Trucking and Shipping backlogs caused by Covid. In addition, the costs of labour are also increasing in the US. Retailers have been increasing prices by reducing promotion magnitudes and are expecting strong demand to offset these effects from inflation.

A shift in fashion trends across the next decade provides positive opportunities for Retailers. With consumers placing more of a focus on a change in the fashion of to wider legs for their trousers/pants, there is subsequent demand for associated clothing due to a change in the fashion look as a whole. There has also been an increase in demand for active wear during Covid from those looking to exercise during lockdowns or to use as casual wear for working from home. Overall these contribute to a strong, healthier outlook for the retail sectors.

One negative for the retail sector comes from the world beginning to return to normality following Covid lockdowns. During Covid a lack of tourism and services options, such as going to restaurants, led to increased demand for retail goods consumers normally wouldn’t spend on. With customers having these options widely available again it has led to brands placing greater importance on the value quality of goods, helped by the cleaning of their distributions.

The call moved into discussing specific stock names, firstly TJX, who are well placed to benefit from a greater focus on value from customers. Additionally they have a very diverse portfolio doing well, such as Home Sense and Home Goods that are doing well in Australia. Urban Outfitters have strong management across their three brands Urban Outfitters, Anthropologie and Free People and execute on bricks and clicks flawlessly. With a Spring fashion cycle upcoming Urban Outfitter is very well positioned to run with the cycle. Ralph Lauren has cleaned up their distribution during Covid, cleaned up their promotional activity and distribution within retailers where they remain in stock. As the business was improving heading into Covid, there has been a greater focus on evaluating the business and making smart decisions. They are starting to see a turn for their Women’s business which was previously in bad shape. Victoria's Secret has addressed major mismanagement issues and began making changes in their marketing that leaves room for them to grow. A greater focus on diverse body representation and marketing for her instead of him has led to significant changes in the way they merchandise the stores, market, brand and sell to their customers. For their “Stay Aways” Under Armour was discussed. Whilst Covid brought greater sales through an increased focus on clothing for fitness and working from home leisure, generally their customer base are in markets where the nations are not fit and healthy people.

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