9 Failing Fashion Retailers in Intensive Care
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Despite the dire threats of a retail apocalypse, retailers pulled it out last year. The retail sector, excluding automobiles and parts, saw a 4.4% increase in 2018 over 2017, with nonstore, including ecommerce retailers setting the pace, up 10.4%.
But last year, not all retail segments were so fortunate. While shoppers were busy furnishing and updating their homes, they were far less interested in updating the clothes in their closets. As a result, clothing and clothing accessories stores saw only a 1.1% increase over previous year, while building materials and garden centers advanced 8% and furniture and home furnishings stores gained 4.8%.
Signs are that fashion retail has entered a new normal, near-steady state, with sales growth leveling at about 1% in 2016 and 2017, after rising over 2% in 2013 through 2015. Look around and there are more stories of failure than success in fashion retail. Customers are simply not buying what many fashion retailers are selling.
The list of failing fashion retailers is growing. While this is by no means an exhaustive list, here are nine retailers entering 2018 on life support, or if not that far gone, at the very least in need of intensive care:
Abercrombie & Fitch lost its cool
For a brand aimed squarely at the fashion tastes of millennials, the biggest consumer generation ever, Abercrombie & Fitch almost has to work to fail. With the parent company propped up by sales of its lower-priced Hollister brand, Abercrombie & Fitch stores account for about 40% of total sales through 3Q2017, and lost 6% in revenue in the same period vs. last year. The number of Abercrombie stores has dropped by 20% since 2013, now with some 300 in the states.
In an effort to revive sales, Abercrombie & Fitch launched a new integrated advertising campaign for the past holiday season entitled “This is the Time,” that takes viewers back to the brand’s 1892 roots as an “outfitter of adventure.” But is that a message for it’s target customers? I think not.
It is also testing seven A&F concept stores designed to make the stores more welcoming places to shop. The concept stores are smaller in scale with gussied up fitting rooms and more friendly, rather than the previous snooty sales staff. Forbes.com contributor Walter Loeb sees signs of revival in the making, but I think it’s going to take more than an external make over to bring A&F back from the brink.
BCBG is now on the D list
After filing for bankruptcy protection in February 2017, BCBG Max Azria was bought by Marquee Brands and Global Brands Group Holding in July. By that time, BCBG had already closed 120 stores to leave 71 still in operation. But upon closing the deal, the new owners will keep only about one-third of those open, continuing operations on a total of 22 stores and the company website.
What remains is an exceedingly small base on which to rebuild a fashion brand on the rocks after losing its founders’ inspiration and vision, as both Max and his wife Lubov Azria have already jumped ship.
Chico’s is getting old
After shedding Boston Proper in early 2016, Chico’s FAS has been taking on water. Net sales decreased 3.8% from 2015 to 2016, excluding Boston Proper, then through 3Q2017 the decline accelerated to 8.4% corporately, including both Chico’s, White House Black Market and Soma stores. In a recent update on 4Q2017 outlook in advance of its end of February annual report, the company expects revenues to continue to flag at a 5%-7% rate.
At its peak at the end of 2015, Chico’s FAS operated 1,546; today the number stands at 1,474. While Chicos FAS may not be ready for life support, it’s likely to close more stores in 2018.
Eddie Bauer is soaking wet
Back in 2014 Eddie Bauer tried unsuccessfully to find a buyer, and now it is trying again, but has yet to find a taker for its brand of outdoor performance wear. With some 370 stores, it is flagging against competition from less debt-ridden competitors, including North Face, Patagonia, REI and L.L. Bean.
Fellow Forbes.com contributor Debra Borchardt identifies the root of Eddie Bauer’s problems as an identity crisis suffered back in 2009, when it shifted focus to the women’s lifestyle market. It has since gone back to its testosterone-infused roots, but a hangover remains with women accounting for a lion’s share of its customers as recently as the end of 2016.
Gap has fallen in the crack
Gap keeps trying to win over customers and bring them back to the brand, but it seems like it has lost much of the fight. In September 2017, it announced that it will close some 200 underperforming Gap and Banana Republic stores and focus on its “growth brands:” Old Navy and Athleta. Gap Inc. is betting heavily on these two brands, with expectations of, “Old Navy to exceed $10 billion and Athleta to exceed $1 billion in net sales in the next few years, driven by growth in online and mobile channels, U.S. store expansion, and continued market share leadership in loyalty categories.”
Richard Passikoff, founder of marketing research firm Brand Keys, reported Gap’s consumers largely abandoned the brand, with its 2016 customer loyalty engagement ranking down 20 spots from previous year. The problem he explained, “I don’t think there’s any kind of a clear sense about what Gap stands for,” in an interview with Business of Fashion.
But if weak brand identity is behind Gap’s failing, then look closely at the brands it hopes to keep the company afloat. Old Navy is basically Gap-lite and Athleta is a poor-girl’s version of Lululemon.
Guess? has to guess again
In its most recent financials, Guess reported dismal results in its Americas Retail segment, with a 13.1% decline in U.S. dollars through the third quarter 2017 and comp sales dropped 12% including ecommerce.
In 2017 Guess? shuttered 60-odd stores and is expected to close another 100 to 120 stores in 2018, leaving it with about half the brand’s foot print from just a few years back when its stores numbered 400. With such a dramatic comp sales decline, however, one can only guess if the pace of store closures will accelerate this year.
J. Crew is a boat without a paddle
J. Crew continues to take on water, even as its new CEO James Brett tries to bail the company out. Through the third quarter J.Crew sales were down 10% and comp store sales declined 11%, following a 9% drop in the first nine months the year before. Like Gap Inc., J. Crew Group is betting on its more affordable Madewell brand to prop it up.
The poor showing has led the company to announce it will close 50 more stores by the end of January 2018, which is double what it projected just three months ago, as reported by USA Today. Slated for closing are its two Twin Cities locations, at Mall of America and Southdale, so it will miss the anticipated Super Bowl influx of visitors. Like Gap, much of the blame for J. Crew’s failing is laid at the feet of confused brand identity, which shifted from on-trend and affordable to high-priced and out-of-fashion.
Loft is collapsing
Loft is an Ascena Retail Group Brand and like its corporate sisters, Ann Taylor, Lane Bryant and Dress Barn, is losing traction with the budget-conscious women it used to serve. Loft is losing sales to T.J. Maxx, Marshalls and others as these women seek to stretch their fashion budgets. With 682 stores at closing of 2017, Loft is twice as large as Ann Taylor with 340.
Earlier this year company executives announced that 667 stores will close as a result of its “fleet optimization program,” and promised that at least 268 stores would be shuttered by July 2019 with the remaining 399 stores to be shut down if rent concessions aren’t obtained. It has, however, remained mum about which store brands will be impacted. While the group has over 4,900 stores overall, its Ann Taylor and Loft brands are core to the company’s “Premium Fashion” segment, which is larger than any of its other three segments.
True Religion has lost its religion
And wrapping this edited list of fashion retailers on the brink is True Religion, a once hot premium denim brand that suddenly is not. Weighed down by a heavy debt burden from when it was taken private in 2013, True Denim filed Chapter 11 bankruptcy in the middle of 2017, which it emerged from in October with less debt and more time to pay it back.
With 140 stores before the recent bankruptcy filing, True Religion cut 27 stores and asked for permission to cancel leases on 29 others. With its fashion style remaining heavily logo dependent, it has yet to wake up to the fact that women are shunning logo-branded fashion in favor of inconspicuous brands. The company obviously didn’t learn the lesson from Juicy Couture.
Plus 1: A’gaci goes bankrupt
And just as I finished posting this, another one bites the dust — Texas-based A’gaci. Retail Dive reports that it filled for Chapter 11 bankruptcy this past week and plans to close 49 of its 76 stores, a 65% cut.
More about Pam Danziger: Pamela N. Danziger is an internationally recognized expert specializing in consumer insights for marketers targeting the affluent consumer segment. She is president of Unity Marketing, a boutique marketing consulting firm she founded in 1992 where she leads with research to provide brands with actionable insights into the minds of their most profitable customers.
She is also a founding partner in Retail Rescue, a firm that provides retailers with advice, mentoring and support in Marketing, Management, Merchandising, Operations, Service and Selling.
A prolific writers, she is the author of eight books including Shops that POP! 7 Steps to Extraordinary Retail Success, written about and for independent retailers. She is a contributor to The Robin Report and Forbes.com. Pam is frequently called on to share new insights with audiences and business leaders all over the world. Contact her at firstname.lastname@example.org.
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