Why Retail’s Challenges Will Continue For The Rest Of 2016

So much for keeping hope alive.

Coming off a tough second half of 2015, footwear and apparel companies expected some challenges to spill into the first few months of 2016. But now, experts say the optimism that those tough times would end quickly and make for a robust second half may be fading.

According to Citi Research Corinna Van der Ghinst, this week’s FFANY market event offered evidence that the U.S. retail environment will continue to face issues for the rest of 2016.

Overall, vendors agree the U.S. retail environment will remain challenged into the back half, with excess carryover inventory from last fall, bankruptcy liquidations, retailers likely to pull promotional triggers early, and price points trending flat-to-down slightly on mix shifts,” Van der Ghinst wrote Wednesday.

Last year’s sluggish holiday season — stoked by heavy e-commerce competition and unseasonable weather — may have given brands and retailers their first major hint of what was to come. Add to that, ever-increasing real estate costs and the result has been a host of retail bankruptcies in 2016.

Sports Authority, City Sports, Bob’s Stores, American Apparel and Pacific Sunwear have all sought Chapter 11 protection during the last few months. And, insiders don’t seem convinced that there aren’t more of those to come either.

Still, experts contend, strong athleisure trends offer some solace.

According to Citi Research analyst Kate McShane, total U.S. athletic footwear point-of-sales gained 18.2 year over year in the first week of June. And all signs point to that momentum continuing.

Though recent sporting goods bankruptcies are contributing to the industry’s excess inventory problems,” Citi’s Van der Ghinst noted, “athleisure remains a bright spot at U.S. retail, driven by: fashion trends still supporting sportier silhouettes in footwear for fall ’16 and into spring ’17; this summer’s major sporting events (Olympics and Euro Champs) injecting new excitement and aspirational buying around sports; and consumers increasingly viewing athleisure as mainstream, year-round product, with a need to replenish and seek out new technologies.”

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