NIKE, INC.

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Apparel, Footwear Could Face 'Tough' Holiday Season Amid Weaker Demand, Wedbush Says

11/23/2022 | 05:07pm
(MT Newswires) -- The apparel and footwear industry could see a "tough" shopping season this year versus last due to high prices and lack of stimulus payments, amid investor concerns that a highly promotional Black Friday may eat into profit margins, Wedbush said in a note Wednesday.

In a recent Wedbush survey that covered more than 700 US consumers, 43% of respondents said they're planning to spend less this year, while 22% said they plan to spend more. That suggests "conservative holiday spending," Wedbush analyst Tom Nikic said.

There is a shift towards casualization, as opposed to "wear to go out" styles, he said. The sporting goods channel saw higher purchase intent year on year, while "far fewer people said they expect to shop for softlines in the mass channel" like Walmart (WMT), Target (TGT) and Amazon (AMZN), at off-pricers or department stores, said Nikic.

Overall, apparel and footwear brands are dealing with "a less-favorable demand environment," according to the report. In an effort to lure consumers with tighter budgets this year, Wedbush said brands are offering "bigger" Black Friday discounts, or they began their deals earlier than last year. There's "too much" inventory in the marketplace, Nikic said.

Early checks show "the heightened promotional activity that investors have feared," said Nikic, noting that 11 of the 21 brands tracked by the brokerage are more promotional this year. Just two of the brands, Hanesbrands' (HBI) Champion and VF Corp.'s (VFC) Vans, seem to be less promotional.

Elevated discounting from Nike (NKE), Adidas and Foot Locker (FL) are "not surprising, given recent commentary about excess apparel inventory, Wedbush said. VF's The North Face and Timberland brands as well as Crocs (CROX) also seem to be big on promos, it said.

The brokerage continues to favor Deckers Outdoor (DECK) and Lululemon Athletica (LULU).

This week, apparel retailers American Eagle (AEO) and Abercrombie & Fitch (ANF) expressed cautious optimism about the holiday season despite high inflation.

MT Newswires 2023
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