Slowing sales of Gap’s children’s clothing show that inflation is hitting the family hard | Popgen Tech
Customers are holding back on spending at Gap and Old Navy — especially in one particular category that shows just how much inflation pressures families are feeling.
When times are tough, parents usually economize on themselves and focus on meeting the needs of their growing children. But Gap and Old Navy said Thursday they are now seeing less spending on baby and children’s products.
“Spending on children is one of the last areas most parents cut back, so the softness at Gap and Old Navy suggests some households are feeling a significant financial strain,” said Neil Saunders, retail analyst and managing director at Globaldata.
Since these brands cater to middle- and lower-income shoppers, this cost reduction is a very real indicator of how frugal households are feeling the pain of price increases. They were forced to resort to the last resort.
Headline inflation is up 7.7% from 2021, even as the latest reading of the prices households pay for essentials and discretionary purchases showed a slight slowdown.
Gap Inc. cuts spending on children’s clothing. (GPS), which operates namesake Gap stores, Old Navy, Banana Republic and Athleta units under its corporate umbrella, was part of the company’s third-quarter earnings call Thursday.
While the company’s total sales increased 2% year-over-year to $4 billion in the quarter ended Oct. 29, the retailer noted that sales growth at both Gap and Old Navy were offset weaker sales in the children’s and babies’ categories.
“Old Navy customers are still inclined to buy. At the same time, the lowest-income consumers continue to experience softer spending and shopping frequency,” Bobby L. Martin, Gap Inc.’s interim chief executive, told analysts on Thursday’s earnings call.
It’s not just Gap. According to market research firm NPD, baby and toddler apparel purchases are down this year, with baby and toddler apparel sales down 3% in revenue and 6% in units sold from January to October. the same period last year.
“It’s a huge financial strain,” said Marshall Cohen, NPD’s chief retail analyst. “We need to look at the overall picture. Are families simply switching to less expensive products and stores, or is this a pullback at all?”
“The other thing to watch is how long the pullback lasts,” he said. “Parents can go so long in clothes that get a little small, but not for long. So a quarter slide is one – several quarters [of decline] send a strong message.”
As parents purchase fewer new items, they turn to resale platforms instead of buying baby clothes and other essentials at lower prices.
Resale platform Mercari said a March Globaldata survey of more than 2,000 parents found that 62% said they had bought second-hand items for their children in the past year. More than a quarter said the motivation for such purchases was inflation, and half of the parents surveyed sold second-hand items in the baby and children’s category.
Mercari said parents of children under the age of 2 are the most active second-hand buyers, according to its survey.
“This is a shift [to reuse] is gaining momentum in 2022 as consumer prices rise amid inflation and continued uncertainty,” said Mercari USA CEO John Lagerling in Mercari’s 2022 Recycling Report: Family Edition.
“In 2021, Americans will spend a total of $143 billion on baby items alone. By 2030, that number is expected to grow to $182 billion. In our opinion, this is simply too much,” he said.
Shopping secondhand is a lifesaver for families on a tight budget, said Bert Flickinger, retail expert and managing director of retail consultancy Strategic Resource Group.
“Families rely heavily on credit cards to pay their rent, food and gas bills, and everything else. Family wealth is down, while the cost of food has gone up,” Flickinger said. “If they haven’t planned ahead, parents are shopping resale and picking up second-hand items from family and friends.”