June 26, 2022

Retired retail manager Terry Lundgren told CNBC on Friday that rising inflation will not be a stress point in the apparel market.

Lundgren, former chairman and CEO of Macy’s, said the industry is indeed welcoming a “modest” 5% increase in consumer prices after a decade of “nonexistent” apparel inflation.

“This is not a big problem for clothing retailers,” he said at Power Lunch. “You’re talking about a few dollars going up in price. It won’t change the consumer’s mind about what to buy.”

Lundgren’s comments come against the backdrop of rising retail sales and falling consumer sentiment in the US as the economy continues to recover.

Even so, Lundgren said, retailers expect a pent-up demand in clothing, driven by a year of Covid-19 lockdowns and consumer purchasing power. He remains optimistic about the second half of the year as schools reopen and the country returns to some sense of normalcy.

Still, he conceded that the spread of the Delta variant would remain a business risk if not contained.

“Clothing is an event-driven activity. When these events happen that we count on for the fall season, including back-to-school and concerts and the like, that’s really good news for clothing.”

The Labor Department reported Tuesday that clothing prices rose 0.7% in June, up from 1.2% the previous month. The clothing index, a component of the consumer price index, rose 4.9% in June year-over-year at the height of the coronavirus pandemic.

The Commerce Department reported Friday that retail sales rose unexpectedly over the past month. The number increased by 0.6% from May and 18% from June 2020. On clothing and accessories, consumers spent 2.6% more in June than in May and 47% more than a year ago.

Meanwhile, a University of Michigan poll released Friday found that consumer sentiment in the US unexpectedly fell in early July. Preliminary results showed the consumer sentiment index stands at 80.8, its lowest level since February and a drop of 85.5 in June. According to a Reuters poll, economists forecast a value of 86.5 in July.