Despite an unseasonably warm winter, there含羞草研究社檚 a chill across the Canadian retail landscape.

Less snow than usual in many parts of the country along with high inflation put a damper on splurging during the typically busy holiday season 含羞草研究社� and now retail industry watchers say apparel companies are staring down an equally fraught year ahead.

含羞草研究社淲hen we look at our consumer research for Canadians right now, it含羞草研究社檚 not as if they are queuing up in order to buy more, let含羞草研究社檚 put it that way,含羞草研究社� said Sandrine Devillard, a senior partner who leads consulting firm McKinsey and Co.含羞草研究社檚 retail practice.

Their hesitance to spend is stemming from soaring prices, high interest rates, layoffs and a slog toward recovering from pandemic debt.

When Canadians are spending, Devillard said apparel isn含羞草研究社檛 a priority. Instead, they are focusing on essential purchases like food and pastimes they were deprived of during the pandemic, such as travel or entertainment.

含羞草研究社淲hen they splurge, they含羞草研究社檇 rather splurge on experiences than buying the extra coat because nobody needs an extra coat, frankly,含羞草研究社� Devillard said.

That thinking has led to an 含羞草研究社渆xtremely volatile含羞草研究社� apparel sector where McKinsey expects year-over-year retail sales growth between two and four per cent in 2024, paling in comparison to the double-digit growth some markets saw in 2021.

The typically resilient luxury market will be hit too, with McKinsey predicting its sales growth to slow to between three and five per cent this year, down from between five and seven per cent in 2023.

McKinsey含羞草研究社檚 forecast is partially based on a survey it conducted of 435 fashion industry executives about their outlook for the year, where the word most often mentioned by the leaders was 含羞草研究社渦ncertainty.含羞草研究社� Some 37 per cent of respondents expected conditions in the fashion industry to remain the same in 2024. Thirty-eight per cent expected the situation to worsen.

Those sentiments cropped up on recent earnings calls from Canada含羞草研究社檚 biggest brands.

Greg Hicks, the president and chief executive of Mark含羞草研究社檚 and SportChek-owner Canadian Tire Corp., blamed 含羞草研究社渞ising interest rates, stubborn inflation impacting discretionary spend and unfavourable weather含羞草研究社� for the company含羞草研究社檚 fourth-quarter profit dropping 68 per cent from a year earlier.

The challenges aren含羞草研究社檛 letting up with credit card data he recently reviewed showing competition across clothing retailers is high.

含羞草研究社淎pparel-focused retailers are having a real challenge on the top line and we含羞草研究社檙e therefore seeing the intensity ramp quite a bit,含羞草研究社� Hicks said.

含羞草研究社淪portChek and Mark含羞草研究社檚 are feeling it.含羞草研究社�

To cope, 69 per cent of the executives McKinsey surveyed indicated they will raise prices this year, compared with 58 per cent a year ago.

Some 44 per cent expect to raise prices by up to five per cent, while 25 per cent have even larger increases in the works.

Luxury parka purveyor Canada Goose Holdings Inc. could be one of the companies that raises their prices.

President Carrie Baker said on the company含羞草研究社檚 latest earnings call that 含羞草研究社渢here含羞草研究社檚 quite a lot of headroom含羞草研究社� for the brand 含羞草研究社渁t much higher price points.含羞草研究社� She didn含羞草研究社檛 say how much higher they could take prices, but some of the Toronto-based company含羞草研究社檚 parkas already top $1,500.

Price hike chatter comes after Lululemon Athletica Inc. chief executive Calvin McDonald warned analysts recently that the apparel market is a 含羞草研究社渕ore dynamic, promotionally driven environment含羞草研究社� these days.

His Vancouver-based company, which is known for its pricey athleisure wear, is resisting the urge to give into these dynamics. It even skipped using 含羞草研究社渟ale language含羞草研究社� to promote its Black Friday deals.

Roots Corp. has a similar tack. Chief executive Meghan Roach said on the company含羞草研究社檚 most recent financial call that it has 含羞草研究社渃hosen to be less promotional含羞草研究社� over the last three years to boost its margins.

However, 含羞草研究社渄iscounts obviously are driving consumer purchasing behaviour,含羞草研究社� so the company still participates in industry-wide sales periods like Black Friday and Boxing Week.

But even those who take part in discounts might find it harder to entice people into spending as 2024 carries on. Royal Bank of Canada economist Carrie Freestone said shoppers have a 含羞草研究社渉oliday hangover含羞草研究社� and have pulled back on discretionary spending even further this year to cope with December bills.

She predicted in a note to investors that retail activity would be 含羞草研究社渄ormant含羞草研究社� in the first quarter of the year and 含羞草研究社渓argely flat含羞草研究社� further into the year.

Devillard had a similar observation.

含羞草研究社淧eople shop less,含羞草研究社� she said. 含羞草研究社淭hey go less to malls, they go less to stores.含羞草研究社�

However, it含羞草研究社檚 not doom and gloom for all retailers.

McKinsey含羞草研究社檚 research shows luxury merchandise like jewelry, watches and leather goods will likely be in demand because they含羞草研究社檙e often seen as having value in tough economic times, while consumers sticking with pandemic exercise and outdoor habits will give a boost to sports apparel companies.

Many of these companies are also adept at innovating their way out of a downturn, Devillard said.

含羞草研究社淲hat含羞草研究社檚 not working anymore is being a little bit complacent or lazy or going for the easy route, which is taking some iconic products and just changing the colour or whatever,含羞草研究社� she said.

含羞草研究社淲hen you have innovation, when you pay attention to sustainability, when you talk directly to a customer and you find your voice, that含羞草研究社檚 when people are ready to splurge.含羞草研究社�

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