Clothing companies won't find much to cheer about in a new report from UBS' Evidence Lab, which reports that consumers' willingness to spend on soft goods shrank 15.7% in December compared to December 2019.
The report finds the December 2022 score is lower than any other December score since at least 2013, with weakness occurring at all income levels. Spending intentions among higher-income shoppers declined 13.3% in December vs. December 2019.
The investment company then compared those declining intentions against a harsher financial reality, with only 38% of Americans now agreeing they are saving enough to meet future needs. And 41% say they feel either insecure or "very insecure" financially.
"We believe this data is consistent with rising revolving credit balances [and] rising mortgage equity withdrawal," writes Jay Sole, an analyst who follows apparel for UBS and is lead author of the report.
The research also uncovered a growing sense of trepidation about unemployment, with 5% of people saying they know people who have been laid off, up from 4.4% in November. And 39% of consumers believe there will be more layoffs six months from now than at present. That increase is significantly above 26%, which has been the average for the last seven years.
Despite UBS' bearish outlook, Sole singles out two companies -- Lululemon and Nike -- as well-positioned to find growth even among consumer cutbacks. Citing the premium position both brands hold among consumers, he believes the brands can innovate and find structural opportunities to grow in the months ahead.
USB continues to favor apparel brands over retailers.
"We see weak growth outlooks for many department stores," the report says. It rates Dillard's, Kohl's, Nordstrom and Macy's as "sell," due to weak earnings outlooks.