Many retailers succumbed to heavy promotional activity in order to keep sales up

Many retailers succumbed to heavy promotional activity in order to keep sales up

Macro factors, particularly in the US and Europe, have created a somewhat challenging environment for retailers in 2014. Many succumbed to heavy promotional activity in order to keep sales up. Subsequently, however, margins and earnings were hit. As a result, a large number of firms were forced to carry out strategic reviews on their business operations in order to turn their businesses around. Here are some of those that just-style has reported on this year.

  • Earlier this month, clothing retailer Austin Reed Group revealed it is working on a strategic review to "maximise the opportunities" for its businesses. Owner Darius Capital is said to be talking to professional services firm Deloitte about a company voluntary arrangement (CVA), which would allow the business to reduce its debts while continuing to trade.
  • In November, beleaguered business The Wet Seal said it had assembled a team to identify and analyse potential strategic and financial alternatives. The company has not set a timetable for completion of the process, which has seen the cutting of 78 jobs in a bid to trim millions of dollars from its cost base.
  • Women's apparel group Ann Inc initiated an assessment of its supply chain last month after lowering its outlook on the back of a challenging and highly promotional retail environment. The company has been under pressure from investors of late, who have urged the group to explore strategic alternatives, including a sale of the company.
  • Australian apparel group Pacific Brands is in the midst of a two-year turnaround plan that includes a restructuring and repositioning of the business. In October, the company said it will consider selling more of its brands as it continues to find ways to drive a better company performance.
  • Retail giant JC Penney outlined a three-year strategy in October that it hopes will return the business to sustained and profitable growth. The strategy identifies three areas, including the revitalising of stores’ “centre core” as a destination for fashion accessories, beauty and jewelry. Also, the firm hopes to "maximise the power, reach and integration” of its omnichannel capabilities, and open more than 100 Disney-branded shop-in-shops by back-to-school 2015, as part of plans to achieve US$1.2bn in EBITDA by 2017.
  • Finnish fashion and department store retailer Stockmann Group implemented a strategy review when its CEO Hannu Penttila stepped down in August. As part of that restructuring plan, in October, the company revealed it was shuttering its 16 remaining Seppälä stores in Russia and selling its Hobby Hall retail division.
  • 2014 saw the implementation of a strategic review for US apparel firm Perry Ellis, in a bid to enhance profitability. The company has exited 23 private and exclusive brands since implementing the initiative, and completed the sale of its Jantzen brand for certain territories in Australasia to its Australian licensee. Perry Ellis said it will continue to exit its low-growth brands as part of the review.
  • In August, Australian surfwear brand Billabong sold its online surfwear assets in a move to a direct-to-consumer omni-channel model across its global operations. The move followed the implementation of a strategic review of its multi-brand e-commerce businesses SurfStitch.com in Australia and Europe, and Swell.com in North America in February.  
  • Also in August, struggling discount retailer Target Canada revealed it is tackling its supply chain and merchandising issues as part of broader plans to try to fix its operations in the country. The move follows a comprehensive review of the company's Canadian operations and will see the retailer carry out a physical count of inventory at all 130 stores in Canada, resulting in a reset of systems, and more accurate ordering and shipping data.
  • In Mothercare's July first-quarter update, newly appointed CEO Mark Newton-Jones outlined a four-pronged modernisation plan designed to "fix the basics" for the struggling mother and babycare retailer. This involves cost reduction and cash generation, rebuilding gross margins, improving online and in-store service, and product improvement.
  • Australasian children's wear retailer Pumpkin Patch announced a strategic review in March, as part of plans to develop an omni-channel business model. This has included a refresh of product ranges and branding strategy, a store performance review, implementation of new supply chain and distribution arrangements, improvement in its product value equation, and a greater leverage of existing customer databases.
  • Another retailer in the midst of a turnaround strategy, in May, American Eagle Outfitters announced a review of its store fleet, and the decision to close 150 stores in North America over the next three years, including around 100 American Eagle stores.
  • In April, Fast Retailing, owner of the Uniqlo casual clothing chain, cut its full-year earnings and sales forecast on the back of weaker demand in its home market. The latter forced the company to review its domestic strategy and look overseas for growth.
  • Value apparel retailer Body Central Corp appointed its second chief executive officer in less than two years last month. The company is working to improve its store and direct business merchandising assortments and drive traffic. In April, it retained Houlihan Lokey Capital as its financial advisor to help review various financing, transactional and strategic alternatives.
  • In March, UK occasion wear retailer Coast revealed it was reviewing its supply chain structure and lowering the prices of its products as part of a restructuring of the business. This has seen Coast move more of its sourcing from Hong Kong to Europe, along with the introduction of new suppliers. 
  • In July, footwear business Crocs unveiled a strategic plan aimed at bringing long-term growth to the company after second-quarter profits slumped by 34%, including more than 180 global job cuts. The four initiatives involve a streamlining of its product and marketing portfolio; a stronger focus on key international markets; the creation of a more efficient structure; and the closure or conversion of 75-100 Crocs stores globally.