Desperate retailers are running unprecedented sales in a sign of trouble to come for clothing brands

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Gap is running a huge sale online. Gap.com
  • Clothing retailers including Gap, Victoria’s Secret, and American Eagle are offering massive online discounts.
  • Gap, for example, is advertising discounts of up to 75%.
  • Many retailers have been promoting work-from-home- and staying-in-themed sales as millions of people shelter in place during the coronavirus pandemic.
  • “What we know is that there will be a blockage of inventory given that there is inventory in stores but no people in stores,” Simeon Siegel, a managing director at BMO Capital Markets, said.
  • Visit Business Insider’s homepage for more stories.

Apparel retailers are holding huge sales online as coronavirus-related store closures continue.

At Gap, you’ll find up to 75% off everything, as well as an extra 50% off markdowns with the code “PERK.” The brand is also prominently featuring its collection of sweatpants and sweatshirts with the tagline “Home Sweats Home,” in an apparent bid to win over the millions of people sheltering in place during the coronavirus outbreak.

At Victoria’s Secret, shoppers can get up to 60% off more than 1,000 styles while supplies last.

Victoria's secret sales

Madewell’s not-so-subtle promo code “VERYRARE” points at the unprecedented nature of the sale.

Madewell sale

While the sales are likely to be welcomed by shoppers looking for a good deal, the steep discounting hints at trouble for the industry.

Clothing retailers are in a uniquely difficult position as stores have closed because of the pandemic. The products they sell are inherently seasonal and based on trends, so having stores closed for an extended period means missing out on a window of time when certain products will appeal to customers. Also, as people shelter in place and many lose employment, clothing has likely moved down the list of purchase priorities.

Discounting typically reflects a need to move unsold stock.

“What we know is that there will be a blockage of inventory given that there is inventory in stores but no people in stores,” Simeon Siegel, a managing director at BMO Capital Markets, said. He added that retailers would often move unsold inventory to off-price retailers like TJ Maxx, but that is not an option in this case, as those stores are also closed.

“That leaves brands trying to generate short-term cash at whatever price you can sell it at,” Siegel said. “Every retailer will have to grapple with this in the foreseeable future.”

Gap, for one, has cancelled its orders for summer and fall.

“Given that apparel retailers are already stuck with a glut of stock that’s not selling, many are reviewing what they need for upcoming seasons,” Neil Saunders, a managing director at GlobalData Retail, told Business Insider’s Bethany Biron earlier this month.

As Biron reported, Gap Inc.’s cancelling of its summer and fall orders is likely just the beginning of the cost-cutting measures that clothing retailers may be forced to take as stores remain closed.

Saunders continued: “Cutting orders completely could create future problems, as when retailers reopen and go into new seasons they will find themselves with products that are unsuited to weather conditions and are out of sync with what consumers want.”

“We are making decisions based on the best interest of our employees, customers, and partners, as well as the long-term health of our business,” a Gap representative told Biron in a statement. “We are committed to working closely with our long-standing suppliers to best assess how we can work together through this crisis.”