Outlet visitation data from the Cowen Consumer Tracker Survey indicates year-over-year gains in both June and July from U.S. consumers along with a “big acceleration” since March, led by the millennial herd.
“Traffic to the outlet channel, an important component of DTC, shows ongoing signs of stabilization which should help with dissolution of any lingering sector clearance,” Cowen and Co. analyst John Kernan wrote Monday. “Visitation to U.S. outlet centers by U.S. consumers among our total survey population is up 400 basis points on a sequential basis since the March 2016 trough and continues to outpace mall traffic.”
While the off-price channel continues to thrive compared to the full-price and luxury sectors, it has not been immune to the tourism slowdown, Kernan notes. (Cowen and Co.’s trackers only surveys U.S. consumers and does not reflect foreign tourist visitation.)
“Brands, retailers and REIT operators continue to report mixed outlet traffic results in Q2 due to tourism,” Kernan writes, adding that results could improve in the second half as FX comparisons get easier and weather evens out.
Increased competition from online sellers as well as traditional off-price retailers could pose additional challenges to the outlet channel, the analyst added.
“Factory stores can be a very profitable contributor to DTC income but with changing consumer shopping behavior, an over-stored industry, extreme weather and persistent traffic headwinds, what was once a favorable channel could lose appeal in favor of online clearance and traditional off-price retailers, leading to an acceleration in store closings,” Kernan wrote.
Still, athletic brands continue to be in the sweet spot. Adidas, Nike and Under Armour — all favored by millennial men — are the biggest drivers of overall traffic to outlets, according to Kernan.
Men currently lead outlet visitation numbers with visitation among millennial men, ages 18-34, increasing 658 basis points year-over-year in June and 535 basis points in July, reaching a new peak of 44 percent. Among men ages 35-54, visitation increased 388 basis points in June and 1,087 basis points in July.