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Retail sales disappoint, but some reason for apparel optimism

Retail sales fell short of expectations in March, including another bleak performance from struggling department stores.

Yet there was some reason for optimism for certain players in the sector. A consumer survey released by Credit Suisse on Wednesday found that clothing retailers — particularly those with a fashion focus — could finally receive the boost they so desperately need.

Sale in mall
Vyacheslav Prokofyev | TASS | Getty Images

According to the firm, which questioned 2,000 consumers with the help of Lucid analytics, fashion apparel ranked as the second most important category to consumers this year, falling short only of intimates. Likewise, the category scored second as the category consumers expect to spend more on this year, again coming in behind intimates.

The results should be welcome news to apparel retailers, who have struggled to generate sales amid a confluence headwinds. Those include deep discounts, which have led to price deflation; a consumer shift toward spending on experiences versus material goods; and the lack of a major fashion trend.

"Should this nascent trend prove resilient in future monthly surveys, we could see an opportunity to become more constructive on a category that we currently view as a structural underperformer," Credit Suisse analyst Christian Buss said.

There have been budding signs of improvement in the apparel category, including a 3.1 percent year-over-year increase at clothing and accessories stores in March, according to the Commerce Department. However, on an adjusted basis, sales at these stores ticked lower in March as compared to February. During the first three months of the year, sales at these stores have increased 2.7 percent, falling short of retail's overall 3.4 percent gain.

Still, analysts have expressed some optimism on the category, citing pent-up demand and budding trends as potential levers to get consumers spending this spring. One such trend is the bralette, a feminine, unstructured take on the traditional bra. Not only is the item drumming up interest among young shoppers, but because it is worn as one part of a layered look, it's encouraging multiple purchases.

Potential good news for apparel retailers, however, does not bode well for other categories. According to Credit Suisse's study, 24 percent of shoppers plan to spend less on watches this year, and 21 percent plan to allocate less of their budget toward handbags and jewelry.