by Jharonne Martis.
With many people quarantined and working from home due to the COVID-19 pandemic, consumer buying patterns have changed. In normal times, demand for the latest fashion trends is strong in the weeks leading up to Easter, a time when retailers are still selling the season’s must-have items at full price. These days, retailers have closed their physical stores and have increased the amount of merchandise on sale online.
While some spending is sure to be constrained by high unemployment, some consumers are apparently willing to pay full price for some fashion items now rather than waiting for a discount later – possibly an encouraging sign for the retail industry. The stay-at-home orders are also having an effect on sales of personal grooming products and furniture.
Refinitiv partnered with StyleSage Co., which analyzes retailers, brands, online trends and products across the globe, to track the change in consumer behavior, including fashion items that have sold out during the week leading to the Easter holiday weekend (April 11-12).
The results reveal that shoppers are going for comfortable and practical clothes while they’re at home even when those products are not marked down. They are also buying furniture for their home offices.
As for personal grooming, sales of shaving products are down, since men and women aren’t going into the office much. During the recent Procter and Gamble earnings call, the company said that one of its biggest challenges is the “lower shave frequency while working from home, to put it bluntly” (Source: Q3 2020 Procter and Gamble Earnings Call).
It’s also a challenge for P&G to maintain its share position with its partner retailers as they are prioritizing shelf space for key essentials.
Sold Out Merchandise
Below are some product categories that have sold out at the highest rates online over the week leading to the Easter weekend. Twenty-two percent of non-discounted robes available in the assortment were sold out over that week. Other comfortable items including socks and sleepwear/pajamas also made the must-have list.
Exhibit 1: Sold Out Merchandise At Highest Rates in April 2020
When looking further at the data for the 30 days between March 22 and April 22, socks and underwear are much higher up on the sold-out list, while 27% of non-discounted robes available in the assortment were sold out over that period. Retailer websites that had some robes selling out included Victoria’s Secret, J.Crew, Madewell, Kohl’s and Macy’s. L Brands, which owns Victoria Secret, has also recorded high sales of antibacterial gels at Bath and Body Works. Despite having posted weak comps over the past quarters, its earnings might be coming from sustainable sources. According to the StarMine Earnings Quality model, the company scores a 99 out of a possible 100 (Exhibit 2). Its high score suggests that profits could be from sustainable sources. The company’s cash flow and operating efficiency components also suggest the company is a top performer in these areas.
Exhibit 2: L Brands StarMine Earnings Quality Model
Consumers are still working out, even at home, and paying full price for activewear tops. Retailers are paying attention. Due to strong demand, the amount of activewear on sale has come down over the past couple of weeks. The amount of active and sportswear merchandise on sale continued to decline (discount penetration) from the end of March, indicating steadiness in this sector (Exhibit 3). The average percentage discount is flat from the same time last year.
MarketPsych love/hate index
Similarly, another retailer benefiting from the activewear trend is Adidas. In terms of favorite companies, shoppers seem to love this sportswear retailer, as Refinitiv discovered in a collaboration with MarketPsych (Exhibit 4). Its indices from Refinitiv scour the news and other media. They analyze and extract meaning to provide a more organic view of which companies are connecting emotionally with their customer base. Since consumers have been quarantined at home, they are also loving the deals at Bebe Stores and gravitating to the shoemaker Crocs.
Exhibit 4: The Most Loved Consumer Cyclicals Stocks Week of April 5 – April 12
While comfort is on the consumer’s mind, shoppers are also buying furniture from Wayfair for their home offices during this work-from-home time. As a result, analysts polled by Refinitiv are becoming bullish on the retailer. Wayfair scores a 79 out of a possible 100 on the StarMine ARM score (Exhibit 5). The latest score is considerably higher than last month’s score of 2. The retailer is benefitting from the fact that shoppers are nesting at home and arranging their new “workplace” to be more comfortable. This could be short-term, depending upon when pandemic ends and competitors re-open their physical stores.
Exhibit 5: Wayfair StarMine Analysts Model 2018 – 2020
Meanwhile, P&G has been ramping up production of antibacterial gels to keep up with strong demand during the pandemic. On the other hand, its grooming segment saw a 3% year-over-year decline in revenue as consumers staying at home bought fewer shaving products during the three first months of the year (Exhibit 6). What’s more, revenue for this segment is expected to decline further by -10% YoY for the three-month period ending June 2020.
Exhibit 6: Actual Revenue in $MM – Procter & Gamble Grooming Business Segment
Meanwhile, men are apparently growing beards while they are home. As a result, 19% of beard-grooming products have sold out online over the past 30 days (Exhibit 7). This is more than twice the 7% rate last year, according to StyleSage Co.
This is happening at the expense of shaving products. Currently, 14% of shaving products are being discounted online. This is starting to trend higher than last year, when consumers shaved more and were going to their offices and only 10% of shaving products were discounted online.
Exhibit 7: Shaving vs. Beard-Grooming 2019 VS. 2020
Global luxury on sale
What’s alarming is that the increasing amount of merchandise on sale (discount penetration) still remains high, especially in the U.S., U.K. and Germany. Relative to last year, about 55% of online luxury merchandise is on sale vs. 21% last year. Similarly, the average discounts in this sector are now twice as high, 19% compared to last year’s 9% average discount (2020 vs 2019).
Exhibit 8: Average Online Discount Penetration and Average % Discount for Luxury Retailers
Source: StyleSage Co.
Luxury retailers incremented the amount of merchandise on sale significantly, and the average percentage discount, also. This suggests that they are definitely feeling the pinch to move inventory. Meanwhile, customers are seeking to improve their “stay-at-home” experience, willing to pay full price for comfortable clothing while shopping for furniture at Wayfair and grooming their home-bound beards.