The apparel industry had a really tough start to 2020, as consumers are buying fewer and fewer items to stock their closets, and companies that typically sell tons of winter coats and sweaters tried to cope with the second-warmest January in the past 29 years.
Receipts at clothing stores dropped 3.1% last month, the most since March 2009, the Commerce Department said Friday.
"The consumer is clearly not prioritizing buying products, but a lot of this is down to unfavorable ranges, boredom with buying and some unfavorable weather: It is not the result of economic malaise or a lack of spending power," GlobalData Retail Managing Director Neil Saunders said.
A slew of retailers had already issued their holiday sales results, for November and December, citing weakness in apparel specifically.
Kohl's had said women's apparel was its weakest category during the holidays. J.C. Penney and Macy's also both had disappointing holidays, and they have both since said they are reworking some of their private-label apparel brands in a bid to win back shoppers.
Many retailers were seen discounting clothing in stores after Christmas. Many had assortments of tops, dresses and pants in stores that were uninspiring, analysts said.
All told, the disappointing January sales data shouldn't come as a shock.
"It doesn't surprise me that apparel is struggling," Retail Metrics founder Ken Perkins said. "Look at where the earnings [for the group] have been. ... They're expected to be down 2% in the fourth quarter."
"I think this is the new normal," Perkins added. "Baby boomers are aging and buying less clothing than they used to. And I don't think millennials are inclined to spend as much on their wardrobes."
Instead, new options like Rent the Runway — where users can pay a monthly fee to rent items to wear to work, to the gym, on vacation and on the weekends — and Stitch Fix — where customers pay to have personalized boxes of clothes shipped to them — are gaining in popularity.
The so-called casualization of the workplace also means women and men aren't buying expensive suits and skirts to wear around the office. Instead, many can get by with jeans and jogger pants.
"I don't see that changing anytime soon," Perkins said about more people going casual.
Second-hand apparel is also in style, as shoppers are increasingly thinking about how they can create less waste when they shop. Companies including The Real Real, thredUP and Poshmark are platforms where people can browse and buy used clothing.
And one can't forget the record-hot January, which put a damper on sales of cold-weather gear. It was the second-warmest January in the U.S. in the past 29 years, Wells Fargo analyst Zachary Fadem said, citing commentary from other retailers. Globally, it was the warmest January on record.
Retail earnings for the holiday quarter are just kicking off, with Walmart set to report Tuesday morning. And that should offer a clearer look at where categories like apparel, electronics, home goods, beauty and grocery are trending into 2020. Earnings reports from Macy's, Gap, L Brands and others will follow in the coming days.
Department store chains and clothing shops are expected to have the biggest earnings slowdowns during the fourth quarter, according to data pulled by Refinitiv.
Also top of mind for many retailers now is the deadly coronavirus, which is already impacting sourcing, manufacturing and deliveries in China. And companies ranging from Ralph Lauren to Under Armour have already said they expect sales to take a hit because of the outbreak.
The S&P 500 Retail ETF was down about 0.4% Friday afternoon. It is down about 2.7% for the year.