• Oil, Economics and the Fashion Industry
  • March 23, 2015 | Author: Jeremy D. Richardson
  • Law Firm: Phillips Nizer LLP - New York Office
  • I’m not an economist; I’m not even a market watcher. In fact, my stock picks notoriously underperform the Dow and the S&P. So, a January 3, 2015, article in The New York Times by Nelson D. Schwartz about dead shopping malls and how they reflect the nation’s economy should not have captured my attention. But it did, as did the www.deadmalls.com website referenced in the article.

    Mr. Schwartz theorizes (with abundant support) it is a clear reflection of the national economy that many A-rated, high-end flagship malls that cater to the wealthy are thriving, while mid-level malls with stores like Sears, Kmart and J. C. Penney as their anchors that serve the working class falter. It’s just another testament to the widening income gap between the haves and the have nots.

    But that may be changing. Gasoline prices have dropped significantly in the past five months. According to the U.S. Energy Information Administration, the average price for a gallon of gas on March 16, 2015, was $2.45. It was even lower at the end of January, just above the $2 a gallon mark, but it’s still much lower than it was last year, when gasoline prices during the summer hovered around $3.70 a gallon.

    What does this mean for the fashion industry? Up to now, the economic recovery has disproportionately aided the wealthy, so it’s no surprise that thriving malls are those that serve the wealthy while dying malls are those that sell to the working class. But with the drop in gasoline prices, working families (at least those whose jobs are not tied to the oil industry) suddenly have some money left over after filling up their tanks. That means that many working class families should have something extra to spend on what would have been an indulgence until very recently, and some of that will be spent on new clothes and accessories.

    My completely unscientific expectation (and I reserve the right to be wrong), therefore, is that fashion companies and retailers that focus on middle income brackets will experience a little bump from first (and hopefully second) quarter 2015 sales. Whether this trend will continue into the second half of 2015 and beyond is anyone’s guess, and my crystal ball remains broken. But worldwide overproduction of oil, if it continues, would keep gasoline prices down, and would leave more money in the wallets of many families. That could lead to a little rally for big box retailers and their suppliers.

    I’m rooting for an improved economy for everyone.