The athletic footwear industry had a solid sales performance in June, a bit of relief after an abysmal April and May. This success, however, may be short-lived.
The NPD Group senior sports industry adviser Matt Powell hinted in a tweet Thursday that July 2020 sales may not be what the market had hoped for. “Think those supplemental unemployment benefits did not help retail? Sneaker business was terrible last week,” Powell wrote on the social media platform.
Speaking with FN, the market expert said early July sales reports — which is not the final audited version he will receive by the end of next week — were not positive. Powell explained that they may have been adversely impacted by a number of factors, most notably the end of the $600 in additional weekly unemployment benefits that ended on July 31.
“We have felt all along, in the bigger picture of things, that the cancelation of the supplemental unemployment benefit would have a negative impact on business. We were convinced going in that part of the reason June was so good was because there was this extra income out there — and people spent that money,” Powell told FN. “It’s in the range of $10 billion a week, just to put it in perspective. This is a significant amount of money that was going into the market and now has stopped.”
He continued, “As I talked to retailers and brands, our feeling was — and they concurred — was that likely the consumer was saying [in July], ‘If they cancel this benefit I’m going to be out some money, I better start saving some of this as opposed to spending.’ We think that a part of this decline is due to the cancelation of the benefit, which at this point has not yet been reinstated.”
The $600 in additional weekly unemployment benefits was part of the massive CARES Act that was signed into law in late March as the country’s labor force buckled against the backdrop of the coronavirus pandemic. Congressional leaders and the White House failed to strike a deal on July 30, and the Senate then adjourned for the weekend — resulting in the subsidy not receiving an extension before the July 31 deadline.
In a July blog post, Powell revealed that the first athletic footwear sales increase since February was experienced in June, which saw a roughly 25% climb.
The insider explained today that the growth was due, in large part, to pent up demand.
“I’ve talked to a lot of people who told me that they bought almost therapeutically, they just felt good to go out and buy something because they couldn’t do it for so long,” Powell said. “And there were an extraordinary amount of limited-edition release shoes in June, some of which were held up from March and April.”
In the months to come, if additional weekly unemployment benefits are not reinstated, Powell believes brands should plan for slumping sales.
“I think people have to rethink their planning and expect to have lower sales. I think we will see some of the more premium product under stress and perhaps move to work to lower price points,” Powell said. “I don’t think we have to start promoting like crazy at this point but I do think a more conservative plan is probably warranted.”
As for how long the slowdown will be, Powell explained, is impossible to tell.
“We have felt that it was going to be softish going through back-to-school because a lot of major school systems aren’t going back, they’re going to do it virtually, and if you’re going to school virtually you don’t need a new pair of shoes. And schools are delayed from previous years by a week or more in many markets and that will shift the [footwear release] calendar later,” Powell said. “We have tens of millions of people out of work with no short term prospect that those jobs are going to come back, and that will cast a shadow over the business.”
He continued, “There’s a whole lot of negativity and changes in the retail calendar that we’re going to have to fight through. I should add that we’re also seeing more and more states having to go back to lockdown to try to get this [coronavirus] thing under control. So the short term prospects are not very good.”