Prices soften as clothes stores record growth

Starting a clothing or apparel store might be the most profitable business move in today's market, according to the latest Investor Pulse report by ICEA LION Asset Management.

The report indicates a significant surge in the fashion and apparel segment, driven by increased customer numbers rather than price hikes - suggesting a softening and stabilisation of commodity prices over the last six months.

According to the data, the clothing and apparel sector posted the strongest performance in the second quarter of 2025, with a 75-point jump compared to the first quarter - and 79 points higher year-on-year.

"Clothing-apparel stores saw the strongest growth... indicating a surge in fashion-related purchases," said ICEA LION Asset Management in the report.

In contrast, businesses dealing in food and beverages saw a modest 7-point increase, while those in house fittings and accessories experienced a 9-point decline. General retail stores recorded a 35-point drop from Q1 2025, although they still remained 19 points higher than in Q2 2024.

Restaurants, bars, and leisure outlets continued their upward trend, posting a 7-point increase from Q1 and 35 points higher than a year ago, signalling steady demand in the hospitality sector.

Over half of retail businesses surveyed reported higher sales in Q1 2025 compared to the same period in 2024, though this was a decline from the previous two quarters, when nearly 60 per cent had reported improved sales.

"For the second quarter in a row, sales increases were mainly attributed to more customers rather than higher prices," the report states. "Businesses reporting lower sales blamed rising operating costs."

In terms of regional trends, Nairobi and Mombasa had the highest proportion of businesses reporting improved sales, while Nakuru and Nyeri led in businesses with declining sales.

Increased sales were commonly linked to essentials such as maize flour, cooking oil, sugar, and milk. Conversely, lower demand was reported for products like vegetables, drinks, and processed staples.

The Investor Pulse also reported a 2 per cent increase in its consumer spending index for the quarter, with higher individual spending offsetting a dip in overall retail performance.

Income levels remained mixed: 40 per cent of individuals reported unchanged income over the past year, 27% saw income growth and 30 per cent experienced income declines.

Eldoret recorded the highest share of respondents with increased incomes, while Kisumu and Nyeri had the highest number of individuals whose earnings fell compared to Q2 2024.