Foot traffic in March took a sharp decline across the U.S. as the month progressed, with some regions heavily impacted by government orders for people to stay home. According to RetailNext, an in-store shopping analytics company, March traffic fell 53 percent compared to last year for stores that closed in March and 21 percent for stores that stayed open. For April, foot traffic will be non-existent in most markets as many retailers closed all of their stores. Once stores are able to reopen, there are many factors that will be top of mind for retailers to recoup lost revenue. Lauren Bitar, head of retail consulting at RetailNext stated, “Retailers will have several factors to contend with upon re-opening, including rehiring and retraining staff, creating and implementing new health and safety guidelines along with ensuring compliance, re-engaging with customers, reporting and forecasting the business, and dealing with the supply chain implications”.
March Foot Traffic U.S. Stores
Data from RetailNext
U.S. Retailers and brands have lost the spring selling season
For retailers in the U.S. market, the lost revenue comes at the most pivotal time in the spring season and hits precisely when regular price selling takes place across most categories. The missed Easter and warmer weather sales will significantly impact the margins and may have a long-term impact on future goods in the pipeline or en route to stores. Bitar cautions, “There are several scenarios that could play out when stores reopen, and having the right data and reporting structure in place will be even more crucial to understand both short-term and long-term impact. If retailers aren’t able to quickly analyze their fleets, run tests and execute nimbly as they do online, they fall behind competitors who are able to react swiftly.’
“We are confident that our businesses will overcome the current crisis”
Even with stores closed at the end of March and heading into April, there are some companies that may be able to overcome the temporary crisis. PVH PVH , the parent company for Calvin Klein, Tommy Hilfiger, Van Heusen, Izod and other brands, was very positive in the earnings call this past week. PVH has a diversified business model including wholesale, retail, direct-to-consumer, franchisees and licensees across many regional markets. Manny Chirico, chairman and CEO of PVH, said with confidence, “The company has a 140 year history marked by countless challenges including two world wars and the Great Depression. We are confident that our businesses will overcome the current crisis.” As with many companies that had solid financial performance in 2019, PVH will be more apt to rebound in 2020. Chirico stated, “PVH ended 2019 with revenues up 6% and a healthy balance sheet. These financial results will help the company withstand the current crisis. While many factors are uncertain and there is no guidance for sales or earnings for the current timeframe, PVH has high confidence it can withstand the current pandemic with strong iconic brand recognition, deep customer loyalty, talented employees, a highly diversified business model and strong financial health.”
Calvin Klein Jeans, Hong Kong. (Photo by Budrul Chukrut/SOPA Images/LightRocket via Getty Images)
SOPA Images/LightRocket via Getty Images
Retailers that have a diversified business across many regions, product categories and channels have a stronger opportunity to offset declining revenue in one sector with another area of the business. Chirico told participants on the call, “ As the U.S. and Europe stores remained closed, there is a positive trend coming from China where all stores have re-opened and March sales for the region were only down 35%.”
Retailers are focused on current inventory levels
As many U.S. stores are closed now, retailers are looking at how to deal with the current inventory levels and how to adequately plan for fall and holiday. While some merchandise can be moved to a pack-and-hold process where distribution centers hold inventory for later selling periods, this will come at a cost and can only be used for basic stock. Other inventory may need to be marked down or sold to the off-price retailers. Some companies, like Inditex (Zara’s parent company), booked inventory provisions in 2019 charging the markdown cost to last year’s financials to offset the company’s inability to sell merchandise at current market value. However, the inventory still needs to be dispositioned. Inditex had a strong financial performance for 2019 reporting a 6 percent net profit increase over the previous year, positioning the company to be able to rebound more readily from the current retail environment.