California Apparel News

Department stores, luxury and teen retail are faring well, and manufacturing is showing gains.

Reflecting the national and international economic woes, retail spending in California was down in the third quarter of 2011, according to financial analysts.

quot;August was a disaster,quot; said John Blank, deputy chief economist for the Kyser Center for Economic Research, when speaking about consumer spending. quot;The news was filled with gloom and people were hearing about the debt ceiling in Europe, and it caused people to hold constant to their spending. Apparel didn’t escape this.quot;

Despite overall lower retail numbers, Back-to-School shopping was still up over last year, and Blank predicted that there will be a quot;popquot; in consumer spending in the next one to two months.

quot;Don’t be surprised if things are going well in October. hellip;People get tired of being pessimistic,quot; he said. quot;I think holiday spending will do well. We saw this sort of lull [in spending] late in the summer, and that doesn’t mean it’s entirely gone, just that people will get sick of it—they’ve had enough of it.quot;

Esmael Adibi, an economist and professor at Chapman’s Claremont Graduate University, echoed these sentiments.

quot;Consumer spending was doing very well at the beginning of the year, but recent statistics are causing a little bit of concern,quot; Adibi said.

Despite the third-quarter dip, national retail sales during the holiday season should be 3 to 4 percentage points higher than last year’s, barring any unexpected correction in the stock market or spike in oil prices, he explained. Strong Back-to-School sales are often an indicator of increased spending for the holidays, he noted.

Retail spending for this next quarter will depend on whether pent-up demand from consumers not shopping as much this year outweighs the possibility of a worsening global economy and higher gas prices, he said.

quot;There are two big uncertainties out there which affect the stock market and consumer mood—what our government and what the European government are doing,quot; Adibi said. quot;If these uncertainties are not removed, the stock market will be very volatile, and that volatility negatively impacts consumer confidence.quot;

The teen and luxury sectors have been holding up quite well this past quarter, according to Adrienne Tennant, a retail analyst for Janney Capital Markets. In comparison, misses customers (women 35 and up) are not doing as well and are spending only with the aid of massive discounts. quot;We’re just seeing it takes a lot more promotions to get that woman to come out and spend her dollars,quot; Tennant said.

Department stores should fare well this season and will likely be much better prepared to handle an economic downturn than they were in 2008 because their inventories are well controlled and the environment is less competitive because of slowed growth for mass merchants, stated Credit Suisse analyst Michael Exstein in an Oct. 4 research report. Nordstrom had its best quot;Anniversary Salequot; in company history, and the company continues to gain share and expand margins, according to Exstein. Macy’s has also fared well and announced it will be hiring 78,000 seasonal workers to address continued sales growth this year. This represents an increase of approximately 4 percent over last year’s holiday hiring.

Manufacturing was another bright spot. Apparel manufacturers have been faring better due to stabilization in the costs of energy and raw materials such as cotton over the past few months, according to Adibi. Looking ahead, they should expect a better season, depending if consumers pull the plug on spending and manufacturers end up with too much inventory.

quot;Manufacturing in general is adding jobs and doing reasonably well because it has exposure to the international marketplace,quot; Blank said. quot;We’re in a global economy now, so if companies have a certain amount of revenue from outside the U.S., then people can actually do quite well. That includes large or small companies. Any apparel company that has international exposure will do much better than you think because countries like China, Korea, Taiwan, Singapore, Hong Kong and Shanghai are planning on 8 percent and 10 percent growth.quot;

On the local level, there has been talk of abolishing the gross-receipts business tax in Los Angeles, but Adibi was doubtful this would happen anytime soon.

quot;Most municipalities are facing very difficult fiscal conditions, and they need that tax revenue in the short term so badly, that even though the idea is good and overall in the long run it would be beneficial, I doubt it would go through because of the short-term squeeze. It would be too hard to give up that cash revenue,quot; Adibi said.