Blog: Leonie BarrieApparel retailers continue to be buffeted by poor sales

Leonie Barrie | 24 May 2016

Apparel retailers are continuing to be buffeted by poor sales – and none more so than US specialty retail giant Gap Inc, which last week set out plans for a turnaround after reporting a soft first quarter.

After comparable-store sales fell a further 5%, the company says it will streamline its operating model and focus on global markets with the greatest potential. The strategy will see the closure of 75 Old Navy and Banana Republic stores outside North America.

Victoria's Secret is also set for change. A focus on core merchandise categories will see the company discontinue its catalogue and swimwear line –a seasonal high markdown business that has not seen sales growth for several years. The retailer hopes the changes will help simplify the business and accelerate growth.

And after its apparel sales took a hammering from unseasonably cold spring weather in the first quarter, US department store operator JC Penney is shifting its focus away from clothing and onto less weather-sensitive categories instead.

But the retailer is not abandoning apparel altogether. Building on the combined strengths of its private brands and the growing plus-size and millennial markets, it has launched its first plus-size line for millennial women.

Swedish fashion retailer H&M has come under fire once more over workplace violations in its supply chains, in particular across India and Cambodia.

But a new Better Buying initiative aims to improve the purchasing practices of apparel retailers and brands by asking suppliers to rate their performance – with the results listed and shared publicly. The idea is that by ranking buyers on things like whether adequate time has been allowed for production, the extent that actual orders vary from capacity booked, and whether contractually agreed payment and terms have been met, will create "a race to the top".

As well as the business benefits of adopting radio frequency identification (RFID),there's wide scope to apply it across various parts of the supply chain too. So it may come as no surprise that sustainability is emerging as the next use case for the technology.

And a long-awaited report on the impact of the Trans-Pacific Partnership (TPP) has confirmed the agreement is likely to lead to a rise in US apparel imports – and that Vietnam would be the biggest beneficiary.

However, the research also suggests that while Vietnam is likely to see some of the biggest apparel export gains from the TPP, its shortfall in yarn and fabric production, ability to meet yarn-forward rules of origin, capacity constraints and related price effects could all weigh on its potential.

Is China really going through a slump? Slowing economic growth and growing competition are hitting the profits of Chinese retailers, while the country's clothing exports to the US dropped 39% year-on-year in March. But what might this mean for the apparel industry?

And in other news, retailers most likely to shrug off the growing threat of Amazon are those who are "un-Amazon-able”; Marks & Spencer and Debenhams stand to gain the most from the break up of high street chain BHS; and clothing stores are continuing to drag on growth in the UK retail sector.


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