Whether you are selling fashion wears, movie costumes, statement shirts or other clothing wears, it is undeniable that the clothing industry is very profitable.
In the United States, the clothing stores are doing great as they have been earning compared to previous years even though the sales growth has at some point slowed down. This is according to a report published by financial information company.
Jump in sales
The net profit margin by privately held clothing stores on the average are nearly 7 percent two years ago. This figure is roughly twice the margin in each of the previous year according to the analysis conducted by Sageworks. Sales growth on the other hand slowed down and registered only at 5 percent compared to the previous year of 7 percent.
The net profit margin of publicly traded entities with clothing as main line of business over the past years has been steady. The net profit margin is around 5 percent.
Sageworks collects financial data for various private companies coming from banks and credit unions, accounting firms and then aggregates the data gathered. This is their cooperative model of consolidating facts. The profitability of private and public companies is not really perfectly comparable since Sageworks adjusts the amount of net margin provided by private companies to exclude taxes while including compensation of owner in excess of the salaries which is at market rate. The adjustments made are not anymore new. They are often made in order to provide more accurate picture of the operational performance of the company. The large clothing retailers which include a lot of public entities generate the most income and employ a lot of people. However, there is also a substantial number of Americans that run their very own clothing retail store. According to Census Bureau, two thirds of the clothing retailers in the US are sole proprietorships.
The analyst of Sageworks, Peter Brown said that retailing in the clothing business is a tough business. He pointed out that several publicly traded retail chains including Aeropostale, Abercrombie & Fitch and Coldwater Creek have announced closing in some of their stores lately.