Inflation and interest rates on fashion consumption

Si vedono gli effetti di inflazione e tassi sui consumi di moda

It was in the air. The combination of inflation and monetary policies implemented by FED and ECB were, sooner or later, going to have an impact on consumption, for fashion goods too. Foot Locker and Nordstrom’s performances are the first ones to show it (sporting goods and fashion goods respectively). Both are expecting a deterioration of their financials due to the cautious approach of the public to shopping. And the stock market welcomes the announcements by punishing stocks.

The problems of fashion consumption

To put it simply, when products cost more (inflation) and money becomes more expensive (due to monetary policies), it’s inevitable for purchasing power to decrease. Foot Locker’s management noticed it, as it closed the 2nd quarter of the fiscal year with 1.8 billion USD in sales, down 10.2% at constant rate on yearly basis. “The current context is challenging”, said CEO Mary Dillon.

And the situation doesn’t look to be improving soon: “We noticed weaking trends for July – she continues -. We are aligning our forecasts for 2023 to be able to better compete with consumers sensible to prices”. Translated: guidance for the entire year has been corrected from -6.5% to -8% to between -8% and -9%. Nordstrom has a different position, but similar problems. The results from the 2nd quarter (3.37 billion in revenue) were above expectations, but still down 8% on yearly basis. CFO Catherine Smith complained that it’s not just about “cautious consumers” across all segments (medium and high end), but also about an NFP and stock amounts becoming increasingly complex.

Photo from Shutterstock

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