American Retailers Have Accumulated Spring Collections Worth Tens Of Billions Of Dollars
American clothing retailers are trying to get rid of unsold goods, including spring collections, for tens of billions of dollars writes The Wall Street Journal.
Retailers offer significant discounts on their websites, but consumers are in no hurry to buy, the publication notes.
Off-price chains such as TJ Maxx, owned by TJX Companies, usually buy unsold clothing and resell at discounted prices, but they are closed. Companies that are engaged in the liquidation of inventory balances - which is usually the last resort - are already inundated with goods from bankrupt retailers who have stopped liquidation sales.
"This is not a wine that only gets better with age," the CEO of PVH Corp. said at a press conference earlier in April. Manny Kiriko. "Your product is getting worse."
Some chains are packing goods to sell in 2021, but company executives worry that it may cost too much and that some of the clothing may go out of fashion.
Last week, premium store chain Saks Fifth Avenue staged a surprise one-day sale, offering spring dresses with discounts of up to 70%. Nordstrom Inc. sells some models with discounts of up to 40%. J. Crew Group Inc. offers a 60% discount on spring clothing, and the Gap brand sells all products with a 60% discount.
"It's black Friday in April," Prashant Agrawal, head of Impact Analytics, told WSJ. He compared April prices online for 400 types of goods with prices on Friday after Thanksgiving in the United States, which begins the traditional Christmas sales season. According to Agrawal, two-thirds of these items-mostly clothing, but also shoes and jewelry are sold at or below Black Friday prices.
However, despite the favorable prices, buyers who are forced to stay at home do not spend money on clothes or shoes. Online sales in this segment have declined weekly since March 9, including in the week ending April 9, when sales fell 20% compared to the same period last year, according to estimates from research company Rakuten Intelligence, which tracks e-Commerce data.
This means that retailers are forced to look for other ways to get rid of deposits of unrealized products and obtain much-needed funds, the newspaper writes. Many chains have resorted to using credit lines and put employees on unpaid leave since March. J. C. Penney Co. and Neiman Marcus Group Inc.missed April interest payments on loans, indicating a difficult financial state.
In normal times, clothing companies typically reimburse the full cost of goods, which includes production, transportation, storage in warehouses and duties, when shipping products to large off-price chains, industry representatives say. They can return between a third and half of the cost of selling goods to an intermediary who resells items to smaller regional off-price chains. In the case of liquidation of product balances through companies that carry out sales, it is possible to reimburse about 10% of expenses. However, in the current conditions, as noted, the levels of cost recovery may be significantly lower.
Sending goods abroad - another common way to eliminate excess goods - is not possible in the context of the coronavirus pandemic, which has led to store closures around the world, company executives say.
One of the options for luxury brands may be to transfer goods to companies that trade in second-hand items. The RealReal Inc., an online marketplace for luxury goods, recorded a 30% increase in shipments from brands in the six weeks to April 14 relative to the same period a year earlier.
Donations are also possible. The nonprofit organization Delivering Good, which takes excess goods from retailers and manufacturers, distributing them to those in need, receives calls from companies with which it has never worked before, group Chairwoman Andrea Weiss told WSJ, noting that one of the firms recently donated 1.5 million items of women's clothing.