Desperate retailers are running unprecedented sales in a sign of trouble to come for clothing brands
- Clothing retailers, including
Gap, Victoria's Secret, and American Eagle, are running massive online discountsright now.
- Gap, for example, is advertising discounts of up to 75%.
- Many retailers have been promoting work-from-home- and staying-in-themed sales as millions shelter in place amid the coronavirus pandemic.
- "What we know is that there will be a blockage of inventory given that there is inventory in stores, but no people in stores," Simeon Siegel, managing director at BMO Capital Markets, said.
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At Gap, you'll find up to 75% off of everything, as well as an extra 50% off markdowns with the code "PERK." The brand is also prominently featuring its collection of sweatpants and sweatshirts with the tagline "Home Sweats Home" in an apparent bid to win over the millions sheltering in place amid the coronavirus outbreak.
At Victoria's Secret, shoppers can get up to 60% off more than 1,000 styles while supplies last.
Madewell's not-so-subtle promo code "VERYRARE" points right at the unprecedented nature of the sale.
While the sales are likely to be welcomed by shoppers looking for a good deal, the steep
Clothing retailers are in a uniquely difficult position as stores have closed amid the pandemic. The products they sell are inherently seasonal and based on trends, so having stores closed for an extended period of time means missing out on a limited window of time when certain products will appeal to customers. Also, as people shelter in place and many lose employment, clothing has likely moved down the list of purchase priorities.
Discounting typically reflects a need to move unsold stock.
"What we know is that there will be a blockage of inventory given that there is inventory in stores, but no people in stores," Simeon Siegel, managing director at BMO Capital Markets, said. He added that retailers will often move unsold inventory to off-price retailers like TJ Maxx, but that is not an option in this case as those stores are also currently closed.
"That leaves brands trying to generate short-term cash at whatever price you can sell it at," Siegel said. "Every retailer will have to grapple with this in the foreseeable future."
Gap, for one, has canceled its orders for summer and fall.
"Given that apparel retailers are already stuck with a glut of stock that's not selling, many are reviewing what they need for upcoming seasons," Neil Saunders, managing director at GlobalData
As Biron reported, Gap Inc.'s canceling of its summer and fall orders is likely just the beginning of the cost-cutting measures that clothing retailers may be forced to take as stores remain closed.
Saunders continued: "Cutting orders completely could create future problems as when retailers reopen and go into new seasons they will find themselves with products that are unsuited to weather conditions and are out of sync with what consumers want."
"We are making decisions based on the best interest of our employees, customer,s and partners, as well as the long-term health of our business," a Gap spokesperson told Biron in a statement. "We are committed to working closely with our long-standing suppliers to best assess how we can work together through this crisis."Read the original article on Business Insider
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