Blog: Leonie BarrieUS retail sales and sporting sponsorships

Leonie Barrie | 6 August 2012

Lured by warm weather and promotions to clear summer merchandise, US shoppers hit the stores in July giving an overall boost to many apparel retailers - but the results shed little light on back-to-school spending plans.

Highlights included a 10% jump in same-store sales at Gap, and a 12% rise at Limited Brands, operator of the Victoria's Secret and La Senza shains. Sales were also up 3.1% at Target, and rose 4.1% at Macy's.

That said, it wasn't all plain sailing. Consumers continue to remain cautious and as the focus shifts to the all-important back-to-school period - the second-largest selling season after the holidays - retailers will be hoping shoppers buy more and visit more stores during August, as two recent surveys suggest.

Sportswear brand Adidas is confident its full-year earnings will come in at the top of forecasts as it capitalises on its successful sponsorships of the Euro 2012 football tournament and the London Olympic Games. "Our association with major sporting events sets us apart from all the competition," chief executive Herbert Hainer said last week, as the company booked a 30% increase in first-half profit to EUR455m (US$563m).

But basic apparel specialist Hanesbrands is still hurting from the impact of the cotton price hikes of recent times, some loss-making divisions and volatility in the US retail market. This challenging combination was reflected in the company's second quarter results - but with the majority of the cotton inflation now in the past, the firm predicts a stronger second half of 2012.

Legislation that will help provide stability for US apparel and textile firms sourcing from sub-Saharan Africa and Central America, and also renews trade sanctions on Burma, was finally passed last week.

But while the move puts an end to uncertainties over AGOA's third-country fabric provision, which had been set to expire in September 2012, the ongoing US import ban on goods from Burma has been criticised for hindering the country's economic recovery by preventing the growth of job-creating sectors such as garments.

And Bangladesh's strong growth in garment exports should not to be taken for granted, according to a report from The World Bank. It says the country must address a number of challenges if it is to see future growth - and that greater export diversification is needed beyond clothing.


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