Despite an unseasonably warm winter, there91裸聊视频檚 a chill across the Canadian retail landscape.
Less snow than usual in many parts of the country along with high inflation put a damper on splurging during the typically busy holiday season 91裸聊视频� and now retail industry watchers say apparel companies are staring down an equally fraught year ahead.
91裸聊视频淲hen we look at our consumer research for Canadians right now, it91裸聊视频檚 not as if they are queuing up in order to buy more, let91裸聊视频檚 put it that way,91裸聊视频� said Sandrine Devillard, a senior partner who leads consulting firm McKinsey and Co.91裸聊视频檚 retail practice.
Their hesitance to spend is stemming from soaring prices, high interest rates, layoffs and a slog toward recovering from pandemic debt.
When Canadians are spending, Devillard said apparel isn91裸聊视频檛 a priority. Instead, they are focusing on essential purchases like food and pastimes they were deprived of during the pandemic, such as travel or entertainment.
91裸聊视频淲hen they splurge, they91裸聊视频檇 rather splurge on experiences than buying the extra coat because nobody needs an extra coat, frankly,91裸聊视频� Devillard said.
That thinking has led to an 91裸聊视频渆xtremely volatile91裸聊视频� apparel sector where McKinsey expects year-over-year retail sales growth between two and four per cent in 2024, paling in comparison to the double-digit growth some markets saw in 2021.
The typically resilient luxury market will be hit too, with McKinsey predicting its sales growth to slow to between three and five per cent this year, down from between five and seven per cent in 2023.
McKinsey91裸聊视频檚 forecast is partially based on a survey it conducted of 435 fashion industry executives about their outlook for the year, where the word most often mentioned by the leaders was 91裸聊视频渦ncertainty.91裸聊视频� Some 37 per cent of respondents expected conditions in the fashion industry to remain the same in 2024. Thirty-eight per cent expected the situation to worsen.
Those sentiments cropped up on recent earnings calls from Canada91裸聊视频檚 biggest brands.
Greg Hicks, the president and chief executive of Mark91裸聊视频檚 and SportChek-owner Canadian Tire Corp., blamed 91裸聊视频渞ising interest rates, stubborn inflation impacting discretionary spend and unfavourable weather91裸聊视频� for the company91裸聊视频檚 fourth-quarter profit dropping 68 per cent from a year earlier.
The challenges aren91裸聊视频檛 letting up with credit card data he recently reviewed showing competition across clothing retailers is high.
91裸聊视频淎pparel-focused retailers are having a real challenge on the top line and we91裸聊视频檙e therefore seeing the intensity ramp quite a bit,91裸聊视频� Hicks said.
91裸聊视频淪portChek and Mark91裸聊视频檚 are feeling it.91裸聊视频�
To cope, 69 per cent of the executives McKinsey surveyed indicated they will raise prices this year, compared with 58 per cent a year ago.
Some 44 per cent expect to raise prices by up to five per cent, while 25 per cent have even larger increases in the works.
Luxury parka purveyor Canada Goose Holdings Inc. could be one of the companies that raises their prices.
President Carrie Baker said on the company91裸聊视频檚 latest earnings call that 91裸聊视频渢here91裸聊视频檚 quite a lot of headroom91裸聊视频� for the brand 91裸聊视频渁t much higher price points.91裸聊视频� She didn91裸聊视频檛 say how much higher they could take prices, but some of the Toronto-based company91裸聊视频檚 parkas already top $1,500.
Price hike chatter comes after Lululemon Athletica Inc. chief executive Calvin McDonald warned analysts recently that the apparel market is a 91裸聊视频渕ore dynamic, promotionally driven environment91裸聊视频� these days.
His Vancouver-based company, which is known for its pricey athleisure wear, is resisting the urge to give into these dynamics. It even skipped using 91裸聊视频渟ale language91裸聊视频� to promote its Black Friday deals.
Roots Corp. has a similar tack. Chief executive Meghan Roach said on the company91裸聊视频檚 most recent financial call that it has 91裸聊视频渃hosen to be less promotional91裸聊视频� over the last three years to boost its margins.
However, 91裸聊视频渄iscounts obviously are driving consumer purchasing behaviour,91裸聊视频� so the company still participates in industry-wide sales periods like Black Friday and Boxing Week.
But even those who take part in discounts might find it harder to entice people into spending as 2024 carries on. Royal Bank of Canada economist Carrie Freestone said shoppers have a 91裸聊视频渉oliday hangover91裸聊视频� and have pulled back on discretionary spending even further this year to cope with December bills.
She predicted in a note to investors that retail activity would be 91裸聊视频渄ormant91裸聊视频� in the first quarter of the year and 91裸聊视频渓argely flat91裸聊视频� further into the year.
Devillard had a similar observation.
91裸聊视频淧eople shop less,91裸聊视频� she said. 91裸聊视频淭hey go less to malls, they go less to stores.91裸聊视频�
However, it91裸聊视频檚 not doom and gloom for all retailers.
McKinsey91裸聊视频檚 research shows luxury merchandise like jewelry, watches and leather goods will likely be in demand because they91裸聊视频檙e often seen as having value in tough economic times, while consumers sticking with pandemic exercise and outdoor habits will give a boost to sports apparel companies.
Many of these companies are also adept at innovating their way out of a downturn, Devillard said.
91裸聊视频淲hat91裸聊视频檚 not working anymore is being a little bit complacent or lazy or going for the easy route, which is taking some iconic products and just changing the colour or whatever,91裸聊视频� she said.
91裸聊视频淲hen you have innovation, when you pay attention to sustainability, when you talk directly to a customer and you find your voice, that91裸聊视频檚 when people are ready to splurge.91裸聊视频�
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