The NFL’s Super Bowl brings people together for one day each year to celebrate that most American of sports: professional football.   And when it is over, viewers will snap up jerseys, T-shirts, and maybe some new jeans, shirts and sweaters and as they return to that other favorite American pastime: shopping.

During the recession, U.S. consumers were like a team that lost its head coach and All-Star quarterback: they took to the field, but their heads were not in the game.  And like a stricken coaching staff, retailers had to scramble to re-organize.  Today, stores are lean, focused and looking to the future — perhaps with new ownership as the climate seems right for an upswing in mergers and acquisitions.  Plus, consumers are in the game — spending less, but still shopping.

Near term, Financo’s Colin Welch, president and CEO, says it is difficult to predict how the spring season will turn out.

“At our annual CEO forum two weeks ago, people were uncertain as to how to forecast their business in 2012.  They don’t have much conviction as to where sales trends are heading. If you don’t buy inventory to support sales growth, you won’t fulfill it.  Stores like to think they could make it up on the margin side, if they don’t sell on sale, but that remains to be seen.”

Less than one-third of consumers (31%) are “very or somewhat optimistic” about the U.S. economy, down significantly from 39% in 2010 and 41% in 2009, according to the Cotton Incorporated Lifestyle Monitor™ survey.  However, consumers feel a bit better about their own personal financial situation — 46% are “very or somewhat optimistic.”

Howard Davidowitz, chairman, Davidowitz & Associates, Inc., a national retail consulting and investment banking firm headquartered in New York City, says future conditions will remain tight.

“The median family income is down 10% [since pre-recession levels],” Davidowitz says. “Many people will continue to watch every nickel.   They’ll continue to trade down because their living standards will be squeezed.”

More than eight of 10 consumers are “very or somewhat concerned” about a reduction in their annual household income, a Monitor statistic that has been relatively consistent since 2009.  Those earning under $25,000 are most concerned (86%), while nearly three-quarters (74%) of those making $75,000+ profess their apprehension.

But last week’s Thomson Reuters/University of Michigan poll shows consumer sentiment rose to 75.0 from 69.9 the prior month — the highest level since February 2011.  The Conference Board Consumer Confidence Index in December rose to 64.5, up from 55.2 in November.

Another positive sign: the Conference Board Leading Economic Index® increased 0.4 percent in December to 94.3, following a 0.2 percent increase in November and a 0.6 percent increase in October.

Board economist Ataman Ozyildirim says, “The gain was widespread among the leading indicators, suggesting economic conditions should improve in early 2012.”

Gary Williams, director of the Gary Williams showroom, whose brands include Rufus, Golden Bear Sportswear and Tailor Vintage, says feedback from New York’s recent Men’s Wear week points to an upward trend.

"Stores like to think they could make [sales growth] up on the margin side, if they don't sell on sale, but that remains to be seen."

-Colin Welch,
Financo

“In asking retailers how they ended 2011, everybody had a better year than the year before.  For some, it was 2%-to-3% increases, but I was also hearing upwards of 12%-to-15%.  Consumers are being intelligent about how they spend their money, whether it’s at a brick-and-mortar, online, at the off-price stores or right on their phones, where they can comparison shop.”

In further evidence of bargain hunting, consumers spend about $53 on apparel each month, down from $58 in 2010, $63 in 2009 and $73 in 2008, the Monitor shows.

Nearly a quarter of consumers shop for most of their clothes at chain stores and mass merchants (24%), followed by department (13%) and specialty (12%) stores, according to Monitor stats.  The percentage of those who frequent mass merchants increased from 2008 to 2009 (25% to 27%), and then declined from ’09 to 2011 (27% to 24%).  From ’08 to ’11, the percentage who shop specialty stores dropped from 15% to 12%; online shopping increased from 4% to 6%; and those who shop for most of their clothes at thrift stores increased from 3% to 5%.

The tight market is creating a climate that is ripe for mergers and acquisitions, Davidowitz says.

“Talbots is being bid on as we speak, and several others are in play.   M&A has been quiet, but it will pick up a little bit in 2012,” he says.  “There are a lot of vulture/venture capitalists out there interested in those deals.”

Welch agrees, saying Financo expects M&A activity to be pretty robust.

“The dialogue is good around potential activity for both apparel wholesale and retail.  Some people are likely to wait and see what happens with Talbots, Collective Brands and Charming Shoppes.  But some favorable trends exist to support M&A in terms of liquidity in the market.  Corporate liquidity is high, with companies sitting on surplus cash.  And capital markets-oriented banks say there’s a dearth of supply in the debt market.  So the demand is there to support interesting transactions.”

–Catherine Schetting Salfino