Blog: US clothing retail sees growth despite looming headwinds

Petah Marian | 8 October 2012

Clothing retailers in the US look set to see growth continue into the holiday season despite economic and political uncertainty continuing to hang over forecasts.

Retail sales remained healthy through September after a strong August, with the International Council of Shopping Centres saying that US apparel retailers saw sales rise 5% on the month.

Yet, a slowdown in consumer spending could be looming in the US, unless the lawmakers can reach an agreement to avoid the "fiscal cliff", which is approaching at the end of the year.

A combination of tax increases and across-the-board spending cuts are set to take effect from the beginning of January unless the president and Congress can agree on a new deficit-reduction plan.

If steps are not taken to avoid the situation, as much as 4-5% could be lost from the country's GDP, warns National Retail Federation President Matthew Shay.

However, the federation is estimating sales will rise 4.1% over the the holiday season to reach US$586.1bn this year, down on the 5.6% increase recorded last year. Yet the news is not all bad, as this forecast is higher than the ten-year average of 3.5% growth.

One victim of the tough US retail environment was Bakers Footwear, which filed for Chapter 11 protection last week after falling sales led to it defaulting on its credit line. The move comes less than two months after Bakers Footwear revealed plans to shed more than 70 stores and up to one-third of its staff in a bid to turnaround the business.

Meanwhile, Gap is set to introduce new fire safety standards at supplier factories in Bangladesh. The proposal will mean hiring a fire safety inspector to oversee garment factories making its brands, loaning vendors up to $20m to make safety improvements and providing up to $2m in compensation to workers at its biggest producers who are displaced while factories are being improved, the company said.

Adidas is looking into the possibility of setting up an industry insurance fund to help workers who are left with no wages or benefits when supplier factories close. This follows the sportswear brand coming under pressure earlier this year to make US$108m in severance payments to workers at a former Indonesian supplier factory after its owner fled without paying them.

Marks and Spencer has continued to push its sustainability credentials, launching the first garment made through the closed loop production process from recycled clothes donated through its Shwopping scheme. The coat, which is made using wool from old or unwanted clothing donated by M&S customers, will be sold for GBP89, which the retailer says is half the price it would be if made using virgin wool.

 

 


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