While total Canadian retail sales increased 10 per cent in the first half of the year, apparel only sales, during the same period, increased 42.9 per cent, according to a report by Trendex North America, a marketing research and consulting firm.
The report indicated that men’s apparel sales (+58.6 per cent) increased at a faster rate than women’s apparel (+38.3 per cent).
Also, apparel sales in the first half of 2022 were 5.7 per cent greater than in the pre-Covid period of January-June 2019.
“The two dominant trends in the first half of 2022 were the lack of growth for activewear/loungewear sales, and the significant increase in dress apparel sales. In the first half, men’s dress apparel sales increased 112.5 per cent, while the same category for women increased 49.8 per cent. Both increases were the largest in the respective gender segments,” said the report.
“Ecommerce sales continued to struggle in the first half as consumers lost all inhibitions as to shopping in malls/stores. During the period, total e-commerce sales fell 18.1 per cent.
“During the first half of the year there was concern that the overall increase in the inflation rate would cause consumers to cut back on their discretionary purchases including apparel. The concern, while logical, did not manifest itself year to date. The torrid increase in retail apparel sales in the first half of 2022 will not be repeated in the second half, as apparel retailing almost returned to normal at the beginning of the fourth quarter of 2021. Trendex is forecasting that apparel sales will increase 7.5 per cent in the second half of 2022 and by 19.4 per cent for all of 2022. Trendex forecasts are based on the assumption that apparel prices in the second half of 2022 will not increase by more than two per cent (y/y) and the overall rate of inflation will fall to 4.5 per cent from 5.5 per cent. An increase greater than six per cent in the overall rate of inflation would almost certainly negatively affect spending on apparel. If Trendex’s estimate for all of 2022 is correct, it would mean that apparel sales in 2022 would end up being 6.1 per cent greater than in 2019.”
Randy Harris, president and owner of Trendex North America, described the Canadian apparel market as experiencing “incredible growth.”
“The first major reason is that in the first half of the year there were no pandemic restrictions on shopping compared to a year earlier. So people came back to the malls with a vengeance, if you will,” he said.
“Secondly, men’s sales were extremely strong in the first half of the year and that is due to the fact that men’s dress apparel, suits and sportcoats, had extraordinary growth because people have returned to the office and therefore they have to buy more dress clothing.
“The same thing happened with women’s dress clothing but to a far lesser extent. What we do see parenthetically is the growth for what I would call leisure apparel has ended in the first half of the year as people return to the work environment. Now in the process, they have substituted buying comfort clothes with dress apparel and that is much more expensive per item. The units might be the same but the dollars spent per unit has gone up drastically.”
Harris said the only disappointing spot in the first half was the decline of e-commerce.
“Some people will say that consumers are simply coming back to the stores instead of buying online. But some people who don’t buy online stopped buying apparel during the pandemic.
“The fact that people are coming back to the stores is helping all age groups and causing all age groups to buy more,” added Harris. “The other thing that people don’t recognize is when people tend to go into stores in Canada to buy apparel, they tend to buy multiple items as opposed to going on and ordering a specific item online. So the incidence of multiple purchasing in-store is greater than online.
“There’s also a lot of promotional selling going on as retailers are trying to adjust their inventories in time for the holiday season. Their inventories are out of whack in a sense over the last two years and now they’re starting to get everything back in order but in order to do that they have to have promotions.”
Harris said the opening up of tourist travel to Canada has increased the luxury apparel market in the country.
“What we have here is an alignment of planets where six or seven things came together to boost apparel sales. Now the bottom line is that the growth in the first half continued, at least through August, and apparel sales were up 37.4 per cent but as we move into the end of the year, the growth rate will slow down dramatically because by the fourth quarter of last year a lot of shopping restrictions had been lifted if not all of them. And that’s why we had a very, very strong Christmas season for apparel last year because in effect there were no restrictions on in-store shopping,” explained Harris.
The Trendex report also looked at what has been recently happening with Hudson’s Bay in Canada, posing the following question: “Is Hudson’s Bay flailing along to simply generate topline sales, or is there a credible long-term strategy underlying its numerous new initiatives since being taken private?”
“Recently Mark Cohen (X-Sears Canada, CEO), indicated that many of HBC initiatives have been designed to address the underperforming space in its stores. This publication is in complete agreement, however the question is whether each initiative will, in fact, increase its stores’ productivity, while not detracting its image. From Trendex’s perspective, many of the initiatives HBC has undertaken are consistent with the objective of increasing its stores’ productivity,” said the report.
“Closing its “mausoleum” stores in Winnipeg and Edmonton were no-brainers, and if truth be told, should have happened at least five years earlier. Given the proximity of HBC’s Bloor St. store to its flagship store, closing the store also seems to be long overdue.”
Potential winners of The Bay’s initiatives include launching a marketplace and adding MEC (Mountain Equipment Corporation) shop in shops.
“Even though there are already a number of e-commerce marketplaces, what sets HBC’s offering apart is that its marketplace customers can use their Bay credit card and acquire Bay loyalty points. This initiative has the potential to significantly increase sales, especially with existing customers and those that are not traditionally HBC customers,” said Trendex.
“HBC’s sporting goods business is underdeveloped as a consequence of both the strength of the segments’ competitors and the profile of the HBC customer. For this partnership to be successful, it needs to be implemented in markets in which MEC does not have a presence and be highly publicized.”
The Trendex report said only time will tell on the retailer’s initiatives with its spin off e-commerce including partnering with children’s reseller Rebelstork.
“As HBC’s infant’s apparel/equipment business is minimal, therefore this initiative becomes a means to increase its sales in the segment. However, after sharing the revenue the direct sales benefits will be minimal unless it leads to additional infants’ sales,” said the report.
And Trendex listed the following as “Just Plain Bad Initiatives” – adding Forever 21 shop in shops and Zellers.
“Previously this publication has made no bones about its view of the decision of HBC to replace its Top Shop/Top Man boutiques with Forever 21, a failed retailer. Why HBC thinks that young women will beat a path to its new fast-fashion shop in shops is a mystery. It should be noted that already three of the Forever 21 shops in HBC have been replaced by MEC shop in shops.
“Easily the most misguided of The Bay’s initiatives is adding Zellers shop-in-shops, at least for now, in a limited number of its stores along with adding Zellers products to its Marketplace. Speaking in favor of the initiative was Tanya Mark associate professor at the university of Guelph, who noted that, “The Bay needs to attract and retain customers to be successful, Zellers will bring in a new customer and increase the value of the shopping basket for those who already shop at HBC”. To which Trendex responds, “au contraire”. While the plan to add a Zellers section to HBC’s Marketplace is logical, having a shop in shop for Zellers branded products runs the risk that HBC’s image will be denigrated, and Zellers purchases could cannibalize HBC’s sales.
“Some pundits have questioned whether HBC’s recent initiatives mirror those of Sears Canada in the period just prior to its demise. From this publication’s perspective the situation of both retailers, is only at best, marginally similar. As others have rightly noted, Sears Canada’s downfall was directly attributable to: Being starved for investment capital by its U.S. parent, a failure to capitalize on the potential for e-commerce and its post Marc Cohen inept leadership. HBC needs to be acknowledged for its willingness to undertake initiatives, but it needs to also recognize that some might result in a short-term gain but a long-term loss.”