The footwear industry, seen as a bellwether for U.S. consumption, is slowing hiring and investment amid forecasts of slower sales.
A survey by Footwear Distributors & Retailers of America, a trade group that represents nearly 500 U.S. footwear retailers and brands, including Walmart Inc., Nike Inc. and Allbirds Inc., found that 87% of businesses expect a decline in sales over the next six years. month. They also predict that operating costs will continue to rise.
In a telephone interview, FDRA chief executive Matt Priest said the results were “dramatic” and “worrying” as inflation jumps the supply chain as the top concern for retailers.
Shoes are a key barometer of economic health because they are a necessary good that consumers buy repeatedly, Priest said. The survey results follow more gloomy forecasts from retailers such as Target Corp. and Kohl’s Corp., which lowered earnings expectations on high operating costs, bloated inventories and shifts in demand.
A recession is generally defined as two consecutive quarterly declines in gross domestic product. Priest said the footwear industry could provide a first glimpse of broader economic performance.
“Because our economy is primarily consumer-driven, we are seeing the impact of a slowing economy before the numbers are official,” he said.
The US economy contracted at an annual rate of 1.6% in the first quarter, according to the Commerce Department.
In this environment, two-thirds of executives say they see new hires declining or remaining stable – a reversal from the group’s last survey released in March, when two-thirds said they were increasing headcount. A majority are also cutting capital spending or keeping it flat – another stark change from the previous survey, when a majority expected higher investments.
There is good news for bargain hunters, however. Nearly half of respondents said they expect to see more discounts over the next six months. This compares to 80% in the previous survey who expected high prices to persist.
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