Despite an unseasonably warm winter, there香蕉视频直播檚 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 香蕉视频直播� and now retail industry watchers say apparel companies are staring down an equally fraught year ahead.
香蕉视频直播淲hen we look at our consumer research for Canadians right now, it香蕉视频直播檚 not as if they are queuing up in order to buy more, let香蕉视频直播檚 put it that way,香蕉视频直播� said Sandrine Devillard, a senior partner who leads consulting firm McKinsey and Co.香蕉视频直播檚 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 isn香蕉视频直播檛 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.
香蕉视频直播淲hen they splurge, they香蕉视频直播檇 rather splurge on experiences than buying the extra coat because nobody needs an extra coat, frankly,香蕉视频直播� Devillard said.
That thinking has led to an 香蕉视频直播渆xtremely volatile香蕉视频直播� 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.
McKinsey香蕉视频直播檚 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 香蕉视频直播渦ncertainty.香蕉视频直播� 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 Canada香蕉视频直播檚 biggest brands.
Greg Hicks, the president and chief executive of Mark香蕉视频直播檚 and SportChek-owner Canadian Tire Corp., blamed 香蕉视频直播渞ising interest rates, stubborn inflation impacting discretionary spend and unfavourable weather香蕉视频直播� for the company香蕉视频直播檚 fourth-quarter profit dropping 68 per cent from a year earlier.
The challenges aren香蕉视频直播檛 letting up with credit card data he recently reviewed showing competition across clothing retailers is high.
香蕉视频直播淎pparel-focused retailers are having a real challenge on the top line and we香蕉视频直播檙e therefore seeing the intensity ramp quite a bit,香蕉视频直播� Hicks said.
香蕉视频直播淪portChek and Mark香蕉视频直播檚 are feeling it.香蕉视频直播�
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 company香蕉视频直播檚 latest earnings call that 香蕉视频直播渢here香蕉视频直播檚 quite a lot of headroom香蕉视频直播� for the brand 香蕉视频直播渁t much higher price points.香蕉视频直播� She didn香蕉视频直播檛 say how much higher they could take prices, but some of the Toronto-based company香蕉视频直播檚 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 香蕉视频直播渕ore dynamic, promotionally driven environment香蕉视频直播� 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 香蕉视频直播渟ale language香蕉视频直播� to promote its Black Friday deals.
Roots Corp. has a similar tack. Chief executive Meghan Roach said on the company香蕉视频直播檚 most recent financial call that it has 香蕉视频直播渃hosen to be less promotional香蕉视频直播� over the last three years to boost its margins.
However, 香蕉视频直播渄iscounts obviously are driving consumer purchasing behaviour,香蕉视频直播� 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 香蕉视频直播渉oliday hangover香蕉视频直播� 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 香蕉视频直播渄ormant香蕉视频直播� in the first quarter of the year and 香蕉视频直播渓argely flat香蕉视频直播� further into the year.
Devillard had a similar observation.
香蕉视频直播淧eople shop less,香蕉视频直播� she said. 香蕉视频直播淭hey go less to malls, they go less to stores.香蕉视频直播�
However, it香蕉视频直播檚 not doom and gloom for all retailers.
McKinsey香蕉视频直播檚 research shows luxury merchandise like jewelry, watches and leather goods will likely be in demand because they香蕉视频直播檙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.
香蕉视频直播淲hat香蕉视频直播檚 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,香蕉视频直播� she said.
香蕉视频直播淲hen you have innovation, when you pay attention to sustainability, when you talk directly to a customer and you find your voice, that香蕉视频直播檚 when people are ready to splurge.香蕉视频直播�
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