Apparel imports for January were reported yesterday. The unit imports were down 17% yy, while average import cost was up 17% yy. The lower imports is a good sign for forward inventories, though still perhaps not quite low enough to offset the prior build. CPI in January accelerated slightly to +3.4% on an easier compare, now compares get tougher over the next couple months, while consumer will weaken with still high inventories in the supply chain. The narrative around holiday is that apparel inventory has been cleaned up. Looking at all of the names that have reported 4Q in apparel brands a retail, retailers look directionally better with YY sales/inv spread at -10% vs -27% last Q, but that still means inventory too high. Looking at vs 2019 (to adjust for supply chain timing issues in 2021), the trend is still slightly better, but not as bullish as the YY. On the brand side, inventories still look outright awful and getting worse on both YY and vs 2019. We are hitting the toughest multi year compare setup right now, as we’re up against reopening post omicron in 2022, and lapping large stimulus payments of Mar/April 2021 and 2020. We suspect demand trends get worse as the consumer continues to tighten discretionary spend around both inflation of necessities and concerns about employment. That means apparel pricing and margin pressure is likely to persist at least through spring, and despite some guide downs we continue to think that margin risk is not yet in 2023 expectations. We continue to be bearish on retail, and apparel in particular.
