Use code WELCOME10 to get 10% off you first purchase of $150+.


‘It’s Black Friday in April’ as Closed Stores Get Desperate to Unload Spring Clothes 

Saks, Gap and others try deep discounts to move unsold dresses and shoes amid coronavirus, but people aren’t buying


Clothing retailers are sitting on tens of billions of dollars of unsold merchandise, and the usual methods for clearing it out aren’t working while the coronavirus keeps most U.S. stores closed.


Retailers are discounting heavily on their websites, but consumers aren’t rushing to buy spring clothes. Off-price chains like T.J. Maxx TJX +1.43% that would normally snap up the excess are also closed. Liquidators, often a last resort, are already saddled with goods from bankrupt retailers that have halted their going-out-of-business sales.


Calvin Klein and Tommy Hilfiger parent PVH Corp.,said on a conference call earlier this month. “Your inventory gets worse.”


Some companies are packing away goods with the intent of selling them next year, a process known as hoteling. But this can be costly and doesn’t work for fashion items that go out of style, executives say.


Saks Fifth Avenue ran a one-day flash sale last week with spring dresses at up to 70% off.Nordstrom Inc. is offering up to 40% off certain styles. J.Crew Group Inc. is offering up to 60% off spring styles, and the Gap brand is selling everything for 60% off.


“It’s Black Friday in April,” said Prashant Agrawal, chief executive of Impact Analytics, which tracked online prices in April for 400 items and compared them with prices on the day after Thanksgiving, when the holiday season kicks off with big promotions. Two-thirds of the items, mostly apparel but also shoes and jewelry, were selling at Black Friday prices or below, Mr. Agrawal said.


Despite the temptation of deals, homebound shoppers still aren’t spending on apparel and footwear. Online sales for the category have declined each week since March 9, including a 20% drop in the week ended April 6, compared with the same period a year earlier, according to Rakuten Intelligence, which tracks electronic receipts.


That means retailers will have to find other ways to get rid of unsold merchandise, and convert those goods into much-needed cash. Many chains have drawn down credit lines and furloughed workers since March. J.C. Penney Co. and Neiman Marcus Group Inc. have skipped April interest payments, signs of deep distress.


The first stop is normally off-price chains like T.J. Maxx, which is owned by TJX Cos. ; Ross Stores Inc. ; and Burlington Stores Inc. But these chains, which are sitting on their own unsold goods while their stores remain closed, aren’t in a position to pick up the excess at the moment. T.J. Maxx has closed its website during the pandemic, and Ross Stores doesn’t sell online. Burlington stopped selling online last month, part of a plan to permanently exit e-commerce, according to a spokeswoman.


“No one is out there buying huge lots of inventory right now because everyone’s stores are closed,” said Adam Freede, chief executive of MadaLuxe Group, a distributor and retailer of luxury goods. “No one has a sense of the pricing, because you don’t know where the floor will be.”


In normal times, apparel companies typically recover the full cost of goods, which includes manufacturing, shipping, warehousing and duties, when unloading inventory to large off-price chains, according to industry executives. They might recover a third to half of costs with a jobber, a middleman who resells the goods to smaller regional off-price chains. The recovery rate with liquidators who run closeout sales is around 10%, the executives said. Recovery rates could be much lower in the current environment, they added.


“It will be a bloodbath,” Cowen Inc. analyst John Kernan said. “There will be old inventory everywhere.”


Shipping items overseas, another common method of disposal, isn’t an option because the coronavirus pandemic has shut stores around the world, executives said. One U.S. company considered shipping unsold luggage overseas so it could claw back the 40% duty it paid on the products—the result of U.S. tariffs on Chinese-made goods—but determined the freight was too costly, according to a person familiar with the situation.


Luxury brands tend to take back their goods, rather than see them widely discounted. In the past, these brands would destroy unsold items. But environmental groups have criticized the practice. In 2018, Burberry Group, facing a backlash, said it would end the practice.


Another option for luxury players is the growing number of sellers of secondhand goods.The RealReal Inc., a consignment company that sells preowned luxury items, had a 30% increase in supply from brands in the six weeks to April 14, compared with the same period a year earlier, a spokeswoman said.


Donations are also up. Delivering Good, a nonprofit that takes excess goods from retailers and manufacturers and distributes them to needy communities, is fielding calls from companies it has never worked with before, including one that recently donated 1.5 million units of women’s apparel, said Andrea Weiss, the group’s chairwoman.


“We’re gearing up for this to be a record year of donations,” Ms. Weiss said. “Before they come to us, they’ve tried online sales, their own outlet stores and off-price retailers. In many cases, we’re the last stop.”


Click here to view the original article >

MadaLuxe Vault is a division of MadaLuxe Group, the largest luxury wholesale distributor in North America. We guarantee that every item we sell is 100% authentic and new. We never sell pre-owned or vintage items, and have an in-house quality control team that is solely dedicated to authenticating the condition and documentation for every item we buy from our luxury brand partners. The MadaLuxe Vault authenticity seal is our assurance that an item has undergone not one, but two rigorous quality and authentication inspections.