Wednesday, April 28, 2010

Borden's Sample Sale Indicator

Today I went to a sample sale. "Sample sales" in Manhattan are quality branded and designer merchandise heavily discounted to clear out seasonal inventory. Over the last six years these shopper gatherings have been my sole source of dress shirts, casual shirts, polo shirts, sports jackets, and suits, not that my lifestyle requires too much of this stuff. With discounts often as much as 80% or even 90% there's not much reason to shop anywhere else.

The sale today was Bobby Jones sportswear and Hickey Freeman dresswear, sort of mid-range for these types of sales. It was the worst sample sale that I had ever taken the time to visit, mostly unattractive merchandise at prices still 50% of retail. I didn't really need anything so no sweat but it was hardly worth the ten minutes that I spent there before walking a few blocks over to Macy's at 34th to replenish my fraying Levi's collection.

The economic news in this experience was positive in a way that I like to think is far more valuable than any quantitative research or analyst opinion that may finally reach this retail investor. The only explanation for this crummy sale is that a combination of more carefully managed wholesale and retail inventories and the beginning stages of a bounce in consumer spending left little to be sold. Truth be told, most of the stuff left at this sale wouldn't move in any market. The dress shirts, business or casual, have always until today been huge bargains, shirts that retailed at $100 or more selling for $29 in the first three days of a sale and $19 for the last two. Today was the fourth day. Hickey Freeman shirts that retail at $118 were priced at $59.95 and they were ugly from the point of view of my refined fashion sense.?!

So the takeaway here is that the retailers will need to build inventory significantly, that their recent inventory costs have been absorbed by sales, and that consumer spending is definitely on the rise. Whether this thought is already built into stock prices or not in an interesting question but my guess would be not completely. In six years of going to these scrums I've never seen a sample sale remotely so poor. If these observations turn out to be relevant, maybe I should get my wife and daughters involved to cover the entire clothing landscape and launch a sample sale indicator as a new economic data point --- as in the University of Michigan consumer sentiment survey, The Economist Big Mac FX index, and Borden's sample sale indicator, sounds good.


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