Denim shorts in winter: Express and Gap stores are saturated with products from previous seasons

By Arriana McLymore

RALEIGH, North Carolina, December 8 (Reuters)Clothing retailers such as Express and Gap that hid mountains of unsold staples during the coronavirus pandemic are now slashing prices on clearance merchandise in a last-ditch effort to empty clothes racks.

But the deep discounts they give on off-season clothing may not appeal to inflation-weary shoppers like 30-year-old Elieth Chaparro.

At the Crabtree Valley mall in Raleigh, North Carolina, Chaparro, whose goal was to find a discounted winter coat, wasn’t thrilled with the Gap clearance section, where she found merchandise from spring or summer, including denim shorts and patterned crop tops for less than $15.99. .

“The fabric seems to have been there for a while,” she said, referring to a short-sleeved pink blouse on the rack.

Retailers including Express Inc EXPR.N and Gap Inc. GPS.N have kept older merchandise, dating as far back as the last holiday season, in hopes of selling inventory this fall.

“If you lower the price enough, you’ll get rid of it,” said Eric Beder, managing director of Small Cap Consumer Research.

Retailers’ margins are under threat during the critical holiday shopping season and their push to be the go-to place for trendy fashion.

Jessica Ramirez, an analyst at Jane Hali & Associates who checks stores frequently, has been seeing summer clothes on Gap shelves for weeks. Retailers placing merchandise from the past season are “not a good sign” for profit margins or customer engagement at a time when demand for apparel is slowing, she said.

“Shoppers are buying to wear right now,” Ramirez added, so having items that customers want and need immediately is crucial.

Gap declined to comment.

Buyer demand has strained clothing retailers throughout the year, increasing inventory and forcing retailers including Gap, Victoria’s Secret and Kohl’s to cut prices.

After receiving holiday items too late for 2021, retailers also started ordering seasonal items earlier in 2022 to avoid supply chain mishaps, but found themselves struggling with lower demand from customers strained by rising gas and grocery costs.

Express on Thursday reported an 8% drop in comparable quarterly sales, blaming lower demand from low-income shoppers and fashion misfires in its womenswear business.

“We are already working to realign our assortments based on customer buying behavior, recalibrate our opening prices and seize opportunities in our women’s segment,” Express chief executive Tim Baxter said during a briefing. appeal to analysts.

The company, which offered holiday discounts of 30% to 50% online and in stores earlier this week, said inventory rose 10% in the third quarter and would improve towards the end of the year.

Total inventory rose 30% in the second quarter and 40% in the first, after the arrival of end-of-holiday merchandise. Sequin blazers and pants from the past holiday season are now in stores, Express told investors in November.

Deals since October and Thanksgiving weekend have increased both in frequency and depth, including at clothing retailers, according to research by Jane Hali & Associates. Some started promoting at higher levels earlier than last year.

General apparel was the most discounted category between Thanksgiving and Cyber ​​Monday, according to Salesforce data on Tuesday, with average discounts of around 34%.


Gap also warned investors in November that moving summer merchandise into fall was a “margin drain,” and now some of those styles are still on Gap’s shelves, according to store checks. released 60% off basic crew-neck tees on Tuesday. The promotion excluded trendier styles like leather-look pants.

In mid-November, Gap chief financial officer Katrina O’Connell said it expected to enter 2023 with reduced inventory, even if it had to cut prices. She said holding on to unsold inventory would “spend money” in the short term and the company is focused on disposing of old merchandise by the new year.

Certainly, getting rid of old clothes by 2023 could help Gap and Express free up space for trendy goods that shoppers are ready to buy and reduce warehousing costs.

Gap’s apparel inventory for the third quarter ended Oct. 29 was 12% higher, with 9 percentage points in what Gap executives call “packaged and curated” merchandise — stored away from basics.” slow moving,” including t-shirts and shorts, which eventually return to the sale floors.

Gap’s profit margin fell to 38.7% in the third quarter from 41.9% a year earlier, heavily impacted by markdowns. Wall Street expects Gap margins to hit 34.61% in the holiday quarter, up from 33.66% last year.

Express reported third-quarter gross margins of 27.8% on Thursday, up from 33.2% a year earlier.

(Reporting by Arriana McLymore, additional reporting by Siddharth Cavale and Uday Sampath Editing by Nick Zieminski)

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