In 2016, the US apparel and footwear industry is expected to grow by three to five per cent. The strong US dollar will continue to have negative foreign currency translation effects on the industry’s gross profits for the rest of this year. Next year, provided foreign exchange rates stay the same, companies will experience a roughly 40 basis point drop in operating margins because of higher sourcing costs at current exchange rates.
Apparel companies will continue to benefit from low cotton and oil prices this year, which could help the industry’s operating margins. Sales for department stores have fallen 24 per cent since 2002 and more and more apparel companies are realigning their focus and growing their online and direct-to-consumer offerings.
Apparel companies, particularly big names like Nike, Ralph Lauren, VF Corp and PVH, are expected to grow sales and expand operating margins through their organic growth initiatives. Nike, VF Corp and Hanesbrands have been the primary revenue and income growth drivers for the apparel sector this year, and they all sell athletic apparel, which points to the continued trend toward athleisure-focused sales.
E-commerce sales in the apparel sector may grow 14.2 per cent next year and online penetration will reach 16 per cent of total sales.
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