Retailers ordering less, culling inventories

With the global pandemic coming on top of a trade war, American consumers are finding their once-endless array of apparel choices quickly disappearing.

There’s disruption everywhere — from manufacturing and shipping delays to store closings and plummeting consumer demand — and merchants are desperate to avoid accumulating piles of hard-to-sell items.

That means chains are ordering less merchandise and cutting slower-selling products from their aisles and websites.

Shoppers might not be able to find those more unusual clothing styles, according to David Shiffman, co-head of consumer and retail banking at investment bank P.J. Solomon.

“You’re going to do a run of blue blazers, and maybe you’ll have two different colored buttons,” Shiffman said, referring to the stocking decisions being made by retailers.

While covid-19 has dramatically eroded demand, the current back-to-school selling season is still expected to bring in $28 billion for retailers. Companies are carefully gauging customer response to reduced apparel inventories, and that could set the stage for the crucial year-end holiday shopping season.

Offering less inventory — a practice that goes against years of steadily expanded assortments of sizes and styles — is in many cases a necessity, not a choice.

Even before the pandemic, supply chains were shifting because of the tariff war between the U.S. and China. Now, the global pandemic adds another layer of complexity as new manufacturing centers such as Bangladesh and parts of Central America become virus hot spots as well. Access to cash is another consideration.

“The supply chain is a disaster,” Shiffman said. In addition to the risk that items go out of style, “there’s a limit to how much you can pack away for next year because you’re packing away your cash.”

Inventory issues are already being highlighted by companies. Macy’s wrote down about $300 million for the first quarter, flagging its fashion merchandise. Nordstrom said its stores were relatively bare of products soon after reopening because of a “conservative approach” to stocking levels to avoid being saddled with excess goods.

With shoppers still largely stuck at home, they don’t have much opportunity to show off outfits, so retailers are focusing on basics.

This category usually accounts for about 70% of a retailer’s mix of products. Now, this has ticked up to 80% to 90%, said Ryan Mulcunry, a managing director at Great American Group, a retail advising firm owned by B. Riley Financial Inc.

“They’re going more basic with colors, and they’re reducing the size spread,” Mulcunry said.