Morgan Stanley Sees Apparel Lagging For The Next 5 Years

Morgan Stanley analysts believe that the price deflation that has plagued the world of U.S. apparel retail is here to stay. In a recent report, analysts forecast a meager one to two percent apparel sales growth over the next five years.
More consumer choices
One of the major problems facing the apparel world is that consumers are increasingly spending disposable income on non-apparel products. In 1972, apparel made up seven percent of personal consumption expenditures in the U.S. As of 2013, that number has shrunk to three percent, while expenditures such as healthcare, consumer electronics, housing and recreation have all gained share.

Trade policy changes
Since the World Trade Organization eliminated textile and apparel quotas in 2005, U.S. apparel retailers have been importing massive amounts of products from low-cost sources such as China and Indonesia. Access to cheaper labor provided opportunity for low-cost American retailers to gain market share.
Fallout from the Great Recession
The economic hardship that came about as a result of the financial crisis made bargain shopping a necessity for many Americans. Morgan Stanley analyst Kimberly Greenberger believes this thriftiness is here to stay. “The emergence of the ‘Recessionista’ made bargain shopping a badge of pride, suggesting a combination of fashionable and savvy shopper.”
According to a Consumer Reports study, 59 percent of shoppers wait for a sale to buy apparel, and 47 percent of shoppers share news of a great deal with family and friends.
Fallout from the new low-price environment
Apparel prices per unit are down 12 percent since 2001. Analysts believe that companies such as Forever 21, The Gap Inc’s GPS Old Navy, JC Penney & Co JCP, and Kohl’s Corporation KSS will continue to struggle to compete with increasingly low-priced competition.