Wedbush Sees Decline In Retailer Promotional Activity, Remains Hopefully On Winter Inventory Sales

Retailer season is upon us. Folks are prepping for summer and retailers are competing for attention. Wedbush believes retailers are taking productive efforts to drive traffic, test new designs/products, and push strong ‘sell-through' numbers. Wedbush praises Express

effort to test ‘Express One Express' which is geared toward the concept of ‘super-soft fabrics bringing a sexy update to your casual tops.' Customers appear pleased especially given that bralettes have sold out online and with promotional marketing down since last year Wedbush remains ‘constructive on 1Q15 EPS.' The Gap

owned Banana Republic has been able to cut its promotional activity as well. The division is now running ‘30 percent off full-priced items' and ‘40% off' for card members currently compared with prior year discounts of ‘40 percent of full-priced items' and ‘50 percent off.' Gap denim has been moving well too as Wedbush notes: ‘As for the Gap division, strength in denim was confirmed this weekend, with most of our mall checkers noting zero promotions on denim, and only select stores running 30% off jeans versus 40% off jeans last year.' The Urban Outfitters

story isn't as rosy. Q1 margins and promotional activity tracking above last year has Wedbush ‘nervous.' Clearance items which mostly consist of over-sized tops, sweaters and denim have been slow to move but this has been trumped by non-apparel inventory strength. American Eagle

has struggled to move winter inventory and Wedbush comments: ‘[winter inventory] seemed out of place next to the new swimsuits and flip flops that were put out at the back of the stores.' One saving grace was American Eagle's decision to stock transitional items such as leggings, long-sleeve flannel and denim shirts for the continuing wintry weather in the Northeast. Overall appears retailers are doing better but clearly benefiting from a consumer willing to spend on promotional merchandise. A build up of winter inventory could be harmful on margins as it takes up floor space that could be used for summer gear. Wedbush appears hopefully that the continued wintry conditions in the Northeast will help move this inventory as opposed to leaving retailer hanging onto it in store or selling it to a store like TJ Maxx

.