Ananya Mariam Rajesh
(Reuters) – Investors are looking at U.S. credit card spending patterns to gauge what trends, if any, could give specialty retailers a boost during the summer months.
Recent quarterly results from retailers show shoppers are selectively buying non-essential, nice-to-have items, forgoing electronics but feeling free to splurge on the wide-leg jeans they’ve been coveting.
This has had a positive impact on sales of fashion products such as Birkenstock (NYSE:) shoes, Abercrombie and Fitch (NYSE:) jeans and Vuori sportswear, and to a lesser extent on products from Home Depot (New York Stock Exchange:) and Best buy (New York Stock Exchange:).
“Consumers are becoming more discerning about where and when they spend their money. They seem willing to spend money on items that aren’t cheap, whether it’s a pair of Hokas or Birkenstocks,” said Zach Stambor, an analyst at market research firm Emarketer.
Demand for fashion items boosted apparel sales growth by 3.2%, sporting goods by 1.9% and footwear by 0.4% in the first quarter of 2024 from a year earlier, according to research firm GlobalData.
But big-ticket items, especially those related to living spaces, have fallen off consumers’ shopping lists. Electronics sales fell 1.9% in the quarter and home improvement purchases fell 4.2% in the first quarter compared with the period a year earlier.
“Outdoor grills, garden sets…TVs, sofas, beds – it’s all gotten a little challenging lately,” said Telsey Advisory Group analyst Joseph Feldman. “Demand has increased during the pandemic and we’re still coming off that high, so you’re still seeing some softness.”
This discrepancy is evident in the retailers’ share prices. Abercrombie & Fitch shares have nearly doubled this year, while Home Depot shares are down 4.5%.
RELEVANCE FOR RETAILERS
Nordstrom (NYSE:) executives said last week that the company’s first-quarter athletic apparel and footwear sales growth was driven by several popular brands, notably Vuori, Hoka and Adidas (OTC:). The department store chain has dedicated dedicated space in its stores to advertise Roger Federer-endorsed On sneakers, Sam Edelman sandals and Birkenstock shoes.
In US retail, “some of the stronger retailers are doing well. And some brands with innovative products are doing well. And others, like department stores, are just consistently trying to find a way to be relevant,” said Morningstar analyst David Schwartz.
Dick’s Sporting Goods (NYSE:) noted on a conference call with investors that it plans to continue its strategy of offering sought-after brands such as Hoka and On Holding sneakers.
Last week, the sporting goods retailer raised its full-year profit and sales forecasts amid strong demand for footwear and athletic apparel. Its shares are up nearly 45% this year.
Other retailers, including VF Corp (NYSE:), Victoria’s Secret and Under Armor (NYSE:), have not seen a rebound in demand, according to analysts, who believe shoppers may feel less pressure to shop at their stores.
Three retailers whose sales fell in the latest quarter from a year earlier are adjusting their merchandise to better attract shoppers.
Under Armor founder Kevin Plank, who returned as the company’s CEO in April, said: “I didn’t envision Under Armor being a player at this point in our journey. However, we will use this turbulence to rebuild our brand and business.”
After a mixed start to the year for retailers, credit card data is giving investors a clue about which products and brands were popular and which were not at the start of the summer.
Consumer Edge, a New York-based research firm with hedge fund and private equity clients, said it analyzed data from about 40 million U.S. credit card transactions to identify the winners and losers in the retail industry. Shoppers spent about 30% more on Vuori activewear in the six months to May 28 compared with a year earlier and 25% more on Skims underwear, the company said.
Skims is a lingerie company owned by Kim Kardashian that is expected to go public later this year or in 2025. Last year, Reuters reported that Skims was in talks with investment firm Wellington Management for a new round of funding, valuing the company at about $4. billion.
Spending on Abercrombie & Fitch products as well as Hoka and On Holding footwear also increased compared to last year, according to Consumer Edge.
However, it said Victoria’s Secret product spending fell in the mid-single digit percentage range, Under Armor saw a single-digit decline and North Face declined in the mid-double digits.
In apparel and footwear, “newer, more niche companies are doing better, and we’re seeing them take share away from more established players,” said Michael Gunther, head of Consumer Edge.