Back-to-school has brought a back-to-basics vibe back to fashion.
As kids everywhere shake off the months of idleness with “What I did this summer” essays, retailers are going through a similar exercise. But instead of detailing beach outings, chief executive officers (and C-suites) are out talking to Wall Street, playing up how hard at work they’ve been — executing on strategy, controlling the controllables, taking their cues from consumers and so on.
The stakes are high, but expectations are low.
Research and consulting firm Customer Growth Partners pegs holiday retail sales for an increase of 2.5 and 3.5 percent this year — with most or all of that increase coming from inflation. It’s been a tough stretch for retail with shoppers growing more cautious and buying closer to need, a dynamic that bodes ill for the holiday rush, which is starting earlier and earlier, but this year is also complicated by the election.
And retailers, who in the recent past have leaned into flashy tech to try to connect with shoppers and drive growth, are now getting back to roots and pushing retail basics. Technology, of course, is not going away, but consumer savvy companies are now looking all the more to get digital in ways that support what have long been viewed as business fundamentals in fashion.
Exhibit one is Abercrombie & Fitch Co., which — as GlobalData’s managing director Neil Saunders pointed out in an analysis — pushed second-quarter sales up 40.9 percent over the past two years.
And those were two tough years for retail.
“The key to this success isn’t complicated to explain, although it is way more difficult to execute,” Saunders said. “At its heart is a complete focus on the customer aligned with operational flexibility to respond to changes and shifts in the market. A great example of this is the way the company has made its supply chains nimbler so that it can chase and quickly respond to emerging fashion trends. This ensures that assortments always look fresh, but more importantly that they are relevant to shoppers. In turn, this drives sales and helps other dynamics such as visit frequency to stores and online.”
Abercrombie might have set the bar impossibly high for the rest of retail, but there are others who have had to rejigger some and are now working their way back with some retail 101 energy.
Target Corp. returned to growth in the second quarter with a 2 percent increase in comparable sales, which chair and CEO Brian Cornell described as “the very top end of our guidance range.”
That comp was driven entirely by the most basic of retail basics: traffic.
Target is getting people into its stores and to its website and, for the first time in a while, getting them to buy more apparel, where comps grew by more than 3 percent in the second quarter, a 5 percent swing for the better when compared with the first quarter.
“Our apparel team has done a fantastic job of incorporating great design, newness and value throughout their assortment, most notably in our All in Motion brand, which delivered growth in the low teens,” Cornell told analysts.
Design, newness and value are all retail classics.
At Gap Inc. — where president and CEO Richard Dickson is working to turn the ship and is touting six consecutive quarters of market share gains — brand is very much in focus.
“We remain focused on driving relevance and revenue by executing on our brand reinvigoration playbook,” Dickson said. “We are building stronger brand identities, supported by trend-right products, amplified through more compelling storytelling with an innovative media mix that is translating to greater cultural relevance.”
The retail challenges of 2024, it seems, require not necessarily a whole new set of skills, but modern updates of the skills that were well honed by 2004.
Fashion is finding its roots just as it heads into a make or break holiday season, which will be something like a game of chicken between consumers and retailers.
There are only 27 days between Thanksgiving and Christmas, five fewer than last year — a tough set up given that, while shoppers have showed up for holiday shopping, many are also waiting until the very last minute to make many purchases. How that collides with a holiday season that is starting earlier than ever, remains to be seen this year.
Calvin McDonald, CEO of Lululemon Athletica Inc., told analysts that, “Our full-year revenue guidance acknowledges the uncertainty around the shorter holiday shopping season and the U.S. election in quarter four.”
Lululemon is expecting revenue growth of about 6 percent to 7 percent this year, excluding an extra week in the fiscal calendar, on par with performance in the second quarter. And while that’s not the growth that the market had come to expect from Lululemon, McDonald said the company is still on target to double its top line between 2021 and 2026, growing to $12.5 billion.
“We plan for our penetration of newness to improve in the second half of 2024, and we expect to be back to our historical levels of newness as we start 2025,” the CEO said.
Newness, that age-old virtue of retail, is new again.
The Bottom Line is a business analysis column written by Evan Clark, deputy managing editor, who has covered the fashion industry since 2000. It appears every other Thursday.
