Fresh data from the US Census Bureau reveals. a cooling in the retail sector, with October sales remaining unexpectedly flat despite a resilient start to the final quarter. While broader consumer spending has propped up the economy, the fashion and apparel industries are bearing the brunt of a ‘K-shaped’ divergence. High-income households, buoyed by a 15 per cent annualized rise in net worth, continue to spend on luxury and travel. In contrast, middle- and lower-income families are aggressively scaling back, facing a 26.4 per cent average tariff rate on apparel imports—the highest in decades.
For the fashion industry, October was a month of ‘holding the line.’ Adjusted spending at clothing and accessories stores saw less than a 1 per cent change, effectively plateauing as shoppers prioritized essentials over aesthetics. This stagnation comes as the cost of living remains elevated, with women’s denim and footwear prices rising between 6 per cent and 8 per cent Y-o-Y year-over-year. The impact of President Trump’s ‘America First’ tariffs has hit the sector particularly hard; with 98 per cent of clothing sold in the US being imported, the removal of duty-free exemptions for small packages has forced brands to either absorb costs or risk alienating an already cautious consumer base.
Resilience amidst macroeconomic fog
Despite the flat headline numbers, the underlying economic engine remains warm. ‘Core’ retail sales, which exclude volatile sectors like gasoline and autos, actually rose 0.8 per cent in October, suggesting, those with disposable income are still active. Economists at the Atlanta Federal Reserve currently estimate Q3 GDP growth at a robust 3.5 per cent. However, the future remains hazy; as noted by Bank of America analysts, the reliance on top-tier earners to carry the weight of U.S. consumption creates a fragile equilibrium. If the ‘wealth effect’ from a booming stock market cools, the apparel sector's ‘flat’ October could easily slide into a winter contraction.
As a bellwether for American retail, Gap Inc. is navigating this polarized economy through a multi-brand strategy that targets both the value-conscious and the aspirational shopper.
A global retail powerhouse operating Old Navy, Gap, Banana Republic, and Athleta, Gap Inc focuses on casual American style with a recent emphasis on ‘cultural equity’ through celebrity-led marketing. The company operates predominantly in North America, which generates over 85 per cent of total revenue, with a significant in-store footprint where 58 per cent of consumers still prefer to shop.
