America is sick and tired of its old clothes: Morning Brief

Yahoo Finance’s Myles Udland, Julie Hyman, and Brian Sozzi discuss the standout category from May’s retail sales.

Video transcript

JULIE HYMAN: Well, something else, of course, the Fed has continued to watch, we've continued to watch has to do with what people are buying. And that's something that Myles wrote about in this morning's Morning Brief. We got the retail sales numbers yesterday. We talked about that. They came in disappointing.

But it is really instructive to look at the breakdown of area by area. As we talked about yesterday, the stuff where we're seeing shortages saw drops in sales, autos, furniture, et cetera. But there's one area in particular the saw strength. It has to do with the fact that Myles is going to have to give up his sweatpants and shorts at some point when we go back into the office, maybe or not. I don't know. Maybe he's just going to buy some new sweatpants and shorts, new office-ready sweatpants and shorts. I don't know, Myles. We'll have to be in suspense on that front. But we know that other people were buying clothes last month.

MYLES UDLAND: Yeah, look, as we know, camera here is beautiful. Lighting is beautiful. No issues with this home setup. But I mean, look, basically, I looked at yesterday's retail sales report. And I thought, of course, of Brian Sozzi and a story that he's been writing about through the lens of the corporate results we've seen from the likes of your Macy's and your Targets and your TJXes about how their consumers have been beefing up on apparel and really coming back to that category.

Now, I don't think any of us believe that apparel and clothing stores, department stores aren't still secularly challenged. But they are clearly in a cyclical upswing. And I think the instructive part of this chart, which we included in today's Morning Brief is, not only are clothing sales up, what, 200% over the same month last year, 765% was the increase from April 20202 into 2021. Obviously, an artificial number based on the collapse in clothing sales that we saw in the absolute depths of the pandemic.

But the level of clothing sales are above anything that was in play in the years before the pandemic began. And so we see this shift into clothes. The way I think about it-- and Sozz, I'm interested in your thoughts on this as well. We've talked a lot about how the economy had to go from services to goods because goods were the only thing that you could consume.

Now we have services reopening, but clothes are really a complement to services, right? If I want to go out and go to a restaurant, go on vacation, I probably want something new to go with that. And I wonder for how long these companies think they can kind of ride this reopening trade.

BRIAN SOZZI: Well it's going to be, I think, for a while, Myles. And as I look into the back half of this year, this may be the single biggest, just really a perfect storm of events for apparel makers, perhaps the best investment setup for retail and consumer discretionary names I've ever seen over the course of 17, 18 years of doing this.

You have very strong demands, to the point where consumers are not just buying one polo shirt and one T-shirt. They're buying five shirts and four pairs of pants because they no longer fit in anything. And they want to have some of the latest, hottest styles because they haven't been shopping, in many respects, for the past year and a half.

Secondarily, what are consumers doing just in terms of their paying? What they're paying for these things, prices are up pretty significantly for tops, bottom, sneakers. We saw that through the lens of the Consumer Price Index report last week. That is another good thing for a lot of retailers.

And then lastly, inventory is very, very low. You go into a Macy's, you go into a Dick's Sporting Goods, inventory out of stocks remain very, very high. Again, another perfect thing for a lot of these apparel makers. If you don't buy it now, you may not get it.

And guys, for me, look, we'll be going back to the office soon. I'm looking for a new suit with some stretch material in my waist. I need a new type of suit post-pandemic. That's just me. I've been wearing elastic waistbands for the past year and a half. I need elastic in my suit waistband.

JULIE HYMAN: Amen to that, Brian Sozzi. We'll get you a Lululemon suit if we can--

BRIAN SOZZI: I'm your guy. Please, please find one, please.

JULIE HYMAN: You know, something else that I think supports the idea that this may be sustainable, at least for the short term, guys, is that shoppers shop seasonally. And right now, while people are focused on beach vacations and going and having cocktails outside, going forward, they're going to be looking to fall, they're going to be looking to winter. So I think that's one thing.

Another thing that I think could support a little bit of momentum here is that as people go out-- and I'm speaking for myself sort of anecdotally here. When you were by yourself, yeah, you're watching TV. You're watching stuff online, whatever. But a lot of our fashion cues come from our peers or street fashion or what have you.

So I think there's also the effect of going out and saying to somebody, oh, I like what you're wearing, where did you get it, or seeing someone on the street and noticing a trend can also help drive some momentum in some of the clothing buying. We'll see if that's just me or if other people are doing the same thing. Myles?

BRIAN SOZZI: Myles, when we met last week, Myles, you look wearing some great pants. That inspired me to go out to Bonobos and buy a lot of new stuff from Lululemon.

JULIE HYMAN: I did notice Myles's pants as well.

MYLES UDLAND: They're regular Lululemon pants. There's nothing special about those pants. And I think, Julie, to your point about seeing what other people are wearing and then having interest in that, there's also an element-- and I find this is where I'm least satisfied with what I have to wear right now. And the summer is the worst apparel season anyway.

I mean, I'm not a male model. So it's not like I want to wear a tank top and show off and all that stuff. There's nothing to show. So I think, ultimately, I'm kind of just tired of what I have. And knowing that other people will see the kind of boringness, the plainness, or whatever that's in the closet is also a little bit distressing at times, though I suppose we all age out of that. And eventually, I won't care, like all suburban dads.

But for right now, I try to think maybe I care that someone sees me wearing just a regular blue polo because that's pretty much all that's in there at this point. Once you get to the layers you know there's more interest, fall, winter, so on and so forth. In the summer though, I don't know. It's kind of a fraught endeavor.