US apparel retail poised for steady growth

Operating income for the US retail industry is expected to grow between four and five per cent in 2017. Sales are expected to grow in the three to four per cent range. Sales growth will accelerate six to eight per cent, supported by direct-to-consumer selling and international growth.

Larger apparel sellers will continue to emphasise top-line organic growth through direct-to-consumer channels, buoyed in part by the significant international expansion opportunities for many brands. Though input costs are rising, they remain manageable. Apparel and footwear sellers, on the other hand, will be squeezed as consumers continue to spend more on healthcare, rent, home-related products, electronics and cars, while weak traffic trends and competitive pressure will continue to impact operating performance of department stores.

Discounters/warehouses will see operating income decline two to three per cent, and Walmart, which accounts for 75 per cent of this subsector, will continue to see weak performance as wage hikes and investment for future growth squeeze its profits. Meanwhile, operating profit will grow less than one per cent in the office supply subsector in the year ahead.