Mix bag of re­sult for cloth­ing re­tail­ers... Store clo­sures to con­tinue


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Over­all re­tail in the US has been look­ing up with busi­ness fore­caster Ki­plinger’s lat­est pre­dic­tion on re­tail sales and con­sumer spend­ing, in­di­cat­ing growth in sales, ex­clud­ing gaso­line and au­tos by 4.2%, a bit bet­ter than 2017’s 4.1% pace. Although cool spring weather across most of the coun­try is hurt­ing cloth­ing, home improvement and de­part­ment stores’ sales, the sit­u­a­tion should turn around once warmer weather sets in. How­ever, what is for sure is that de­part­ment stores will see only mod­est growth, as will cloth­ing re­tail­ers. The rea­sons are many, but sur­pris­ingly yearend re­sults an­nounced in March and first quar­ter sales for 2018 of many de­part­ment stores and cloth­ing re­tail­ers, have shown im­proved re­sults, fool­ing many into think­ing that the cri­sis is over!

There was a buzz in the stock mar­ket, as re­tail­ers that were con­sid­ered down and out, in­cluded Macy’s, Kohl’s and even Dil­lard’s, beat­ing Wall Street expectations in their lat­est fi­nan­cial re­ports filed in March. Many fore­cast­ers up­scaled their pre­dic­tions, but oth­ers pru­dently warned that bet­ter per­for­mance comes mostly against a back­drop of easy com­par­isons, an un­usu­ally strong hol­i­day sea­son and tight in­ven­tory man­age­ment. In­dus­try watch­ers also pointed out that large store clos­ing also af­fects the re­main­ing ones pos­i­tively, as the com­pe­ti­tion among seem­ingly sim­i­lar stores, de­creases.

Store clo­sures have been on a high with al­most all de­part­ment stores clos­ing ‘un­prof­itable’ lo­ca­tions across the coun­try. Nearly a dozen more of Macy’s de­part­ment stores will soon be clos­ing their doors as a part of the re­tailer’s plan to close ap­prox­i­mately 100 stores, which was an­nounced back in Au­gust 2016. Af­ter clos­ing more than 140 stores in 2017, JCPen­ney is shut­ting down one of its dis­tri­bu­tion cen­tres and eight more stores na­tion­wide, af­fect­ing about

670 jobs with the clos­ing of the dis­tri­bu­tion cen­tre and around 480 em­ploy­ees by the eight stores that are clos­ing. The re­tailer has failed to gain any real trac­tion de­spite Sears’ flag­ging for­tunes and has been con­tin­u­ously dis­ap­point­ing the re­tail an­a­lysts. Just days af­ter the hol­i­day shop­ping sea­son ended, Sears Hold­ings an­nounced that it has de­cided to shut down more than 100 stores, of which 64 are of Kmart and 39 are Sears’ stores. “Sears Hold­ings con­tin­ues its strate­gic as­sess­ment of the pro­duc­tiv­ity of our Kmart and Sears store base and will con­tinue to right size our store foot­print in num­ber and size,” the com­pany said in a state­ment, adding, “In the process, as pre­vi­ously an­nounced, we will con­tinue to close down some un­prof­itable stores as we trans­form our busi­ness model so that our phys­i­cal store foot­print and our dig­i­tal ca­pa­bil­i­ties match the needs and pref­er­ences of our mem­bers.” The com­pany shut more than 350 lo­ca­tions last year.

As­cena Re­tail Group, the women’s cloth­ing re­tailer that op­er­ates the brands Ann Tay­lor, Loft, Dress

Barn, Lane Bryant, Jus­tice and sev­eral oth­ers, is plan­ning to windup hun­dreds of stores. In June 2017, the com­pany ex­ec­u­tives an­nounced that 667 stores are part of its fleet op­ti­mi­sa­tion pro­gramme. At least

268 of those stores will def­i­nitely be closed by July 2019. The re­main­ing

399 stores will be shut down if rent con­ces­sions aren’t ob­tained through ne­go­ti­a­tions with land­lords, as main­tain­ing these stores have be­come a fi­nan­cial bur­den on the com­pany. Even re­tail­ers do­ing rel­a­tively bet­ter, are look­ing to down­size. With

J.Crew sales de­creas­ing 8% and its com­pa­ra­ble sales de­creas­ing 10% fol­low­ing a de­crease of 8% last year, the J.Crew Group an­nounced in March that it plans to dis­con­tinue with 20 stores in 2018. How­ever, the re­tailer says it’s see­ing re­sults in its most im­por­tant busi­ness – women’s ap­parel, with Madewell sales ris­ing 23%. Aber­crom­bie & Fitch hasn’t fin­ished with shrink­ing its re­tail foot­print, though net sales in­creased 15% for the last quar­ter of the fi­nan­cial year and 5% for the year end­ing Fe­bru­ary 2018. The teen ap­parel com­pany said it plans to shut down about 60 stores in the US dur­ing the fis­cal year as leases ex­pire and there seems no rea­son to re­new them. Over­all, 2017 was a year of sig­nif­i­cant progress for A&F as the com­pany achieved sev­eral im­por­tant mile­stones, in­clud­ing Hol­lis­ter grow­ing to US $ 2 bil­lion in sales, Aber­crom­bie re­turn­ing to pos­i­tive com­pa­ra­ble sales for the fourth quar­ter and record dig­i­tal sales across all brands. Mean­while, Gap Inc. plans to shut

200 Gap and Ba­nana Repub­lic lo­ca­tions over the next three years, sim­ply be­cause they are all ‘un­der­per­form­ing’. At the same time, Gap Inc. will open 270 lo­ca­tions for its grow­ing brands, Old Navy and Ath­leta. In the most re­cent quar­ter, same-store sales at Old Navy jumped 9%, driv­ing an over­all same-store sales in­crease of 5% for Gap Inc. In fact, Gap is mak­ing a big bet on Old Navy, its dis­counted ap­parel brand for shop­pers who en­joy brows­ing off-price re­tail­ers like T.J. Maxx and Ross Stores in search of a deal. This is in pur­suit of the re­tailer’s up­dated growth strat­egy an­nounced late last year, which called for roughly 200 Gap and Ba­nana Repub­lic stores to close by 2020. The move is to shut stores at old malls that are no longer ex­cit­ing cus­tomers, and move to more open-air cen­tres and streetlevel re­tail where the cus­tomers are hap­pier shop­ping. Wind­ing up cash-drain­ing stores and tweak as­sort­ments is not the real so­lu­tion to the down­fall of de­part­ment stores; a se­ri­ous eval­u­a­tion needs to be made to ad­dress the fun­da­men­tal rea­sons why de­part­ment stores have been ced­ing mar­ket share to the off­price, value-ori­ented, fast-fash­ion and more fo­cused spe­cialty play­ers for more than a decade. Just how much im­pact will be felt with the cur­rent flow of store clo­sures is un­cer­tain, but the im­pact will def­i­nitely be felt. Also, an in­cre­men­tal improvement in mar­gin and com­pa­ra­ble sales growth rates, merely a point or a two above in­fla­tion can­not be re­ally de­fined as an improvement in the for­tunes of the re­tail­ers.

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