Retired retail executive Terry Lundgren told CNBC on Friday that rising inflation will not be a stress issue in the apparel market.
Lundgren, a former Macy’s executive chairman and chief executive, said the industry indeed welcomes what he called a “modest” 5% increase in consumer prices after a decade of “non-existent” apparel inflation.
“It’s not a big concern for apparel retailers,” he said on “Power Lunch.” “You’re talking about increasing the price by a few dollars. It’s not going to change the consumer’s mind when it comes to purchases.”
Lundgren’s remarks come against the backdrop of improving retail sales and declining consumer sentiment in the US as the economy continues to recover.
Despite this, Lundgren said the retail industry is relying on demand from the Covid-19 lockdown and consumers’ spending power to sustain in apparel for a year. He remains optimistic about the second half of the year as schools reopen and the country returns to normalcy.
Nevertheless, he acknowledged that the delta variant spread remains a risk to the trade if it goes unchecked.
“Apparel is an event-driven activity. If these events are happening, that we’re counting on for the autumn season, including going back to school and concerts and that’s really good news for apparel.”
The Labor Department reported Tuesday that apparel prices rose 0.7% in June, up from a 1.2% increase a month earlier. The apparel index, a component of the consumer price index, was up 4.9% in June, when compared to a year ago, at the height of the coronavirus pandemic.
The Commerce Department reported Friday that retail sales rose unexpectedly last month. The number grew by 0.6% from May and 18% from June 2020. For apparel and accessories, consumers spent 2.6% more in June than in May and 47% more than a year ago.
Meanwhile, a University of Michigan survey released on Friday found that consumer sentiment unexpectedly fell in the US in early July. Preliminary results showed the consumer sentiment index at 80.8, the lowest read since February and down from 85.5 in June. Economists had forecast a July reading of 86.5, according to a Reuters poll.