What do you do when you when you need to rein in your shopping habit? Clean out the closet and try to make your old stuff feel new, right?
Retailers are trying the same tactic.
Here’s the deal: Gap and Kohl’s, among others, are stuck with a glut of extra clothes that they can’t sell at current prices and don’t have a ton of space for. They’re overstocked. But rather than slashing prices to try to move the inventory, they’re just going to try again next year.
It’s a strategy known as “pack and hold.” (Though I might call it “pack and hold and pray customers don’t catch wise.”)
Gap, for one, is stashing summer styles that didn’t sell in 2022 and hoping to try again next year. Kohl’s is holding on to an extra $82 million worth of inventory, including sleepwear and fleeces, that it plans to peddle anew for the holiday season.
The reason: Retailers have too much stuff because we the people pulled back on spending on fun things like clothes as the cost of boring things like groceries and gas and rent have gone way up.
Clothing is a particularly strange sector, too, as people emerge from work-from-home life and prepare to go back to the office, unsure of what the vibe will be. We may not know what we want to wear, and we may not buy anything until we figure that out.
So why don’t Gap and Kohl’s just slash prices? That’s a tried and true way to move inventory and free up space, but it can also dilute the brand, my colleague Nathaniel Meyersohn explains.
Or, as one industry analyst put it: “Promoting can be cheap today and very expensive tomorrow.”
Holding onto merchandise isn’t cheap, and retailers run the risk that fashion will move on and make old wears look painfully out of date. But if retailers hold onto the right stuff — your black T-shirts, your comfy denim shorts — they may just buy themselves time. Heck, Gap might be able to sell a two-year-old tank top at an even higher price point if demand goes back up.
Forecasting demand is a tricky game, though. On the bullish side: Consumer confidence appears to be rising again after a three-month decline, according to a new Conference Board survey. And thanks to falling gas prices, Americans are feeling a bit better about things.
The bearish take: Overall, Americans are still pretty worried about the economy and think we may be heading toward a recession. Those perceptions are important because they affect how we spend, especially on clothes.
RELATED: Walmart, Target and Bed Bath & Beyond also are struggling with an oversupply of merchandise and lack of demand for items such as furniture, electronics, home decor and clothing. But those are exactly the categories that are in high demand in the secondhand marketplace, according to an online resale industry report.
NUMBER OF THE DAY: 5%
US stocks closed their third consecutive session in the red Tuesday, following a brief morning rally that quickly petered out. Oil prices fell 5%, prompting a selloff in energy stocks.
The Dow tumbled nearly more than 300 points, or 1%. The S&P 500 and the Nasdaq both fell 1.1%
While oil led the decline, markets are still reeling from Fed Chair Jay Powell’s blunt speech at Jackson Hole on Friday, which led to a more than 1,000-point plunge in the Dow.
MUSK GAINS AN EDGE
Last week, when the world learned of a former high-ranking Twitter executive blowing the whistle on alleged security lapses, it was clear Elon Musk and his team of lawyers would try to use the development to their advantage in court. Now we’re finding out just how.
On Monday, Musk’s legal team sent a letter to Twitter, citing allegations leveled by the whistleblower, Peiter “Mudge” Zatko, as further evidence that should allow Musk to walk away from his $44 billion offer to buy the company. Musk’s lawyers also subpoenaed Zatko to give a deposition in the case.
Then on Tuesday, Musk further leveraged the Zatko claims to request a delay their October trial by a full month.
Twitter responded with its own filing Tuesday, calling Musk’s argument “invalid and wrongful.”
Quick recap: In case you’ve been snoozing on the back and forth here:
- Musk is trying to walk away from the deal because, according to him, Twitter lied about some its spam bot data. But the real reason, most likely, is that he realized he was massively overpaying for the company and fighting it in court was a way to, if not fully renege on the deal then at least get a better price.
- Twitter, unlikely to get a better offer elsewhere, wants the court to force Musk to close on the deal.
- A trial is set for October.
- Meanwhile, Twitter’s been hit with allegations from Zatko, its former head of cybersecurity. Zatko, who was fired by the company in January, accuses Twitter of “egregious deficiencies” in its cybersecurity defenses that could put users, investors and US national security at risk.
- Twitter has criticized Zatko and broadly defended itself against his allegations.
Musk’s legal strategy feels like less of a moonshot now than it did two weeks ago, before Zatko went public with his allegations, reported first by CNN and the Washington Post.
Prior to the Zatko allegations, many legal experts stated that Twitter held the upper hand in the case. Musk’s core claim that the spam-account issue amounts to a “material adverse effect” that would release him from the agreement struck many legal experts as a stretch.
At the very least, Zatko offers the kind of credibility and trustworthiness that Musk, a serial exaggerator trashposter, sorely lacks. In blowing the whistle on Twitter, Zatko may, for better or worse, wind up giving Musk an edge in the court of public opinion.