It is no secret that Covid-19 has placed many companies in distress. While there were companies who were in distress long before the pandemic, retail businesses – whose livelihood depended on foot traffic – took a serious knock as three quarters of the world’s population was put into lockdown for the majority of 2020.
I recently read an article which was published on the Gordon Brothers website, which paints a more detailed picture of this impact.
High end retail takes a beating
One of the specific features of high-end retail, specifically in women’s fashion, is that shoppers can be treated to an experience that they will not find in other retail outlets. This was obviously impacted by Covid as consumers were forced to go online, and it is impossible to replicate the personal touch found in stores online.
The Gordon Brothers article points out that, following a difficult year of COVID-19-induced shutdowns and low foot traffic, numerous women’s apparel companies filed for bankruptcy, shuttered completely, or downsized their store base. Apparel retailers have taken a bigger than average hit as lifestyles changed and spending on essential items took precedence over clothing and accessories.
The article adds that announcements of negative comp sales trends and bankruptcy filings ensued throughout 2020. Ascena Retail Group, parent company of Ann Taylor, Justice, Lou & Grey and Lane Bryant, filed for bankruptcy in July 2020. Subsequently, Ascena announced the closure of all its Justice stores and numerous Ann Taylor, Loft, Lane Bryant, and Lou & Grey locations to right size its store footprint in preparation to sell the brands.
The article added that RTW Retailwinds, owner of New York & Co, also filed for bankruptcy in July 2020 with plans to permanently close its 400 brick-and-mortar stores. J. Jill evaded bankruptcy but experienced a decrease of 29% in third quarter sales over 2019. While the retailer closed just five stores in 2020, it plans to close more unprofitable locations going forward. In July, Coldwater Creek reported the closure of its entire store base and website. In October, Gap Inc announced it would be exiting malls and closing 220 of its namesake stores and 130 Banana Republic stores by early 2024. Gap’s net sales were down 28% for the second quarter while Banana Republic’s sales were down 52% for the same period. Additionally, L Brands, Chico’s, Guess, H&M, J. Crew and Lucky Brand are among the brands that closed stores or plan to in 2021.
their businesses to fit in with new consumption habits
Men’s fashion follows suit
Its not only the high-end women’s fashion outlets that are taking a hammering. I read another article by the Gordon Brothers which shows that high end men’s fashion stores are facing similar problems.
The article pointed out that as businesses across the country shifted to work from home, sales of men’s formal clothing fell 74% and men’s smart casual wear fell 62% year over year from March to June 2020, according to analytics firm GlobalData. Demand is expected to remain low well into 2021 as unemployment levels remain high and many continue to work remotely. The pandemic accelerated a trend that began as a large portion of the baby boomers retired, which lead many companies to permit business casual or fully casual attire in offices since many individuals in the current workforce are Generation X and millennials. This demographic shift will continue to influence the industry’s product mix as dress codes reflect a more casual work environment.
The article added that, because of these trends several major menswear retailers struggled in 2020, including men’s fashion retailer Brooks Brothers that filed for Chapter 11 bankruptcy in July 2020 before permanently closing 51 stores. Tailored Brands, parent company of Men’s Wearhouse and Jos. A. Bank, filed for Chapter 11 bankruptcy in August 2020 after announcing plans to permanently close to 500 stores and cut its corporate workforce by 20% to focus on its go-forward next-gen stores and e-commerce business. For the first half of 2020, Men’s Wearhouse, which leans heavily toward suiting and business wear, was down 65% while Jos. A. Bank’s sales decreased 78% for the same period. Once reopening fulfilment centres at the end of March, the company’s e-commerce sales, which include formal wear rental service sales, dropped 32% in the first quarter versus last year, reflecting the impact and lifestyle shift brought on by the pandemic.
The article pointed out that Omni-channel Destination XL, a men’s big and tall apparel retailer, reported a soft holiday 2020 performance, with total sales decreasing approximately 24% to $78.4 million for the nine-week sales period ended January 2, 2021, compared to $103.1 million for the comparable period in 2019. Similarly, the company’s comparable store sales decreased 38.1%; however, there was an upside as e-commerce holiday sales increased 28.4%.
The article added that, as the men’s category continues to shift away from suiting and formal wear, gross recovery values for those categories may be challenged to the extent inventory levels exceed demand. Alternatively, casual and athleisure wear categories in both apparel and footwear continue to outperform dress categories for most menswear retailers.
A shining light
We all know that the future of retail is going to be as focused on the enhancement of the customer experience as it is on the product /service that is on offer. This has been the case with high-end fashion, the challenge now becomes finding a way to add this value across the digital void.
It may seem difficult, but it can be done. I have pointed out in a previous article how Nike effectively made their five-year retail target in a single year of online sales. However, the immediate question is not about sales, its about the translation of adding value to the customer experience digitally. Warby Parker is a US business that sells (optical) glasses and sunglasses. Most of their business model is online based. A consumer finds a set of glasses that they like and makes the selection. They then have the option of taking the pair of glasses that they ordered for a five-day trial run to see whether the glasses are suitable. Once the consumer is happy, they upload their prescription (obtained from their optometrist) and the glasses/sunglasses are delivered to them in 10 working days. Shipping is free. They also have brick-and-mortar stores in selected cities across the US for those who want the conventional experience.
Companies need to adapt or die. Business models have changed significantly over the years, and we are currently facing a period of significant disruption. The Warby Parker example shows that the customer experience can be enhanced digitally, you just need to be innovative in your thinking. Alternatively, speak to a business rescue professional, they will know what to do.
