Retired retail executive Terry Lundgren told CNBC on Friday that rising inflation will not be a point of tension in the apparel market.
Lundgren, former executive chairman and chief executive of Macy’s, said in fact the industry welcomes what he called a “modest” 5% increase in consumer prices after a decade of “nonexistent” apparel inflation.
“This is not a big concern for apparel retailers,” he said on “Power Lunch.” “You’re talking about a few dollars going up in price. It’s not going to change the consumer’s mind in terms of purchasing.”
Lundgren’s comments come amid a backdrop of improving retail sales and a fall in consumer sentiment in the U.S. as the economy continues its recovery.
Despite this, Lundgren said the retail industry is counting on pent-up demand to sustain in apparel, spurred by a year of Covid-19 lockdowns and consumers’ spending power. He remains optimistic about the second half of the year as schools reopen and the country returns to some sense of normalcy.
Still, he acknowledged that the spread of the delta variant remains a risk to the business if it goes uncontained.
“Apparel is an event-driven activity. If these events happening which we’re counting on for the fall season including back to school and including concerts and the like that’s really good news for apparel.”
The Department of Labor on Tuesday reported that apparel prices rose 0.7% in June, coming off a 1.2% increase the month prior. The apparel index, a component of the consumer price index, in June was up 4.9% when compared with a year ago at the height of the coronavirus pandemic.
The Commerce Department on Friday reported that retail sales unexpectedly rose last month. The number increased 0.6% from May and 18% from June 2020. As for apparel and accessories, consumers spent 2.6% more in June compared with May and 47% compared with a year ago.
Meanwhile, a University of Michigan survey released Friday found that consumer sentiment in the U.S. dropped unexpectedly in early July. The preliminary results showed the consumer sentiment index at 80.8, its lowest read since February and down from 85.5 in June. Economists projected a July reading of 86.5, according to a Reuters survey.
Source: Business - cnbc.com
