Apparel collapse drags down retail in April

Dive Brief:

  • With most nonessential stores shut due to the pandemic, retail sales in April in the key sectors tracked by Retail Dive plummeted 16% year over year, according to the U.S. Department of Commerce’s preliminary results for the month. Retail trade sales as defined by the government fell 17.8% compared with the year ago period.

  • Some sectors were particularly hard hit. Clothing and accessories sales plunged 89%; furniture and home sales fell 67%; electronics sales fell 65% and sporting goods and hobby sales fell 46%. General merchants, which in most cases were permitted to stay open thanks to sales of essential items, saw sales fall 14%, according to the report.

  • Others did see a lift. E-commerce and other non-store sales rose 28%, and grocery stores rose 13.4%, the Commerce Department said.

Dive Insight:

As stores began shutting down in March, leaving most if not all nonessential stores dark in April, e-commerce promised to save the day. But that hasn’t really panned out as consumers all but stopped shopping for discretionary goods.

Online sales did spike enough “to capture 19% of overall retail sales; compared to 12% on average the past two years,” according to a note from Wells Fargo Economics Group, led by Senior Economist Tim Quinlan. “The lockdowns are accelerating the shift to online sales that was already in place for the past several years,” he said.

But that shift was hardly complete, or enough to protect retailers from the fallout. “There was a sharp rise in online sales as consumers transferred some of their trade to digital channels,” GlobalData Retail Managing Director Neil Saunders​​ said in emailed comments. “However, this switch was only partial and was insufficient to make up for the closure of non-essential shops.”

Other factors, like work furloughs and layoffs, also undermined discretionary spending, according to Wells Fargo analysts led by Senior Analyst Zachary Fadem. “April reflects the grim reality of COVID-19’s impact on the consumer, as jobs were lost, stores were shuttered, and household wallets tightened with focus only on essentials,” he said in emailed comments. 

But the nosedive in apparel stands out. Much of retail’s record poor performance in April falls on what appears to be a collapse in that category. Clothing retailers in the entire last month eked out a level of sales that a year ago they accomplished in just three days, according to Saunders. “The shutdown of most physical apparel stores, plus the sharp decline in outfits needed for work and leisure contributed to the precipitous drop,” he said. “While there were a few bright spots, most notably from athleisure and comfort clothing, consumers simply turned their backs on fashion in April.”

Moreover, the shift to e-commerce, an inventory pileup in recent weeks and the discounts meant to entice wary shoppers are all wreaking havoc with apparel retail margins, analysts said this week

While apparel’s decline overshadowed most other sectors, furniture and home goods retailers and electronics retailers also took their knocks in April. “The boost in electronic accessories to aid working from home was nowhere near enough to offset the shunning of other areas of the mix including phones, televisions and appliances,” Saunders noted.

Fadem’s Wells Fargo team tracked a 1.2% rise in home improvement sales, “benefiting from renewed focus on the home, a likely step up in DIY activity, government stimulus and an earlier [year-over-year] lawn & garden season (due to warmer weather).”

As dire as things were in April, they would have been even worse, were it not for the government’s moves to provide relief, which bodes well for retailers in coming weeks, according to Fadem. “While millions of consumers remain unemployed and health concerns linger, we believe government stimulus offered a life-line late in the month, and we see reasons to believe May can improve as states re-open and consumers return to work,” he said.