Store closures and bankruptcies weighed on some apparel retailers in 2016

Store closures and bankruptcies weighed on some apparel retailers in 2016

A local-for-local manufacturing vision, expansion in Asia, robotic warehousing and automated delivery systems helped lift some retailers during 2016, but concerns over conditions and working practices, store closures and bankruptcies weighed on others.

WINNERS

Under Armour 

US-based sportswear brand Under Armour delivered its 26th consecutive quarter of 20%-plus revenue growth in the third quarter of 2016, with sales increases across all divisions. Net sales rose 22% to US$1.47bn. Apparel sales accounted for the lion's share, rising 18% to US$1.02bn. The company is forecasting full year sales of nearly US$5bn, a growth of around 24% over the previous year. Under Armour's local-for-local manufacturing vision is also taking shape, with a new state-of-the-art 'UA Lighthouse' facility in the US that will serve as a hub for manufacturing and design innovation.

Skechers 

US casual footwear brand Skechers also enjoyed a bumper year, booking its highest ever third quarter sales figures in 2016. The company announced the expansion of retail operations in South Korea through a new joint venture called Skechers Korea with Hong Kong-based conglomerate Luen Thai Enterprises in November. Skechers already operates 57 concept and outlet stores in South Korea and is counting on the new venture to expand not only its South Korean business but also its regional footprint, according to the company's CEO David Weinberg.

Hennes & Mauritz (H&M)

Asia was also a focus for Swedish fashion giant Hennes & Mauritz (H&M), which will open its first Vietnamese stores in the coming year. H&M follows the likes of Zara, Mango and Gap into the Vietnamese market, also launching an e-commerce platform in South Korea. Although the retailer has posted sluggish overall sales this year, with forecasts of a less-than-spectacular fourth quarter blamed on unseasonable weather, its expansion programme shows no sign of slowing, with a net addition of 425 new stores in 2015-16 and entry into 11 new e-commerce markets.

Hudson's Bay 

Robotic warehousing and automated delivery systems promises to be a competitive edge for retailers expanding their online business. Canadian retailer Hudson's Bay (HBC) opened a US$60m state-of-the-art robotic fulfilment system at its Scarborough Distribution Centre in Toronto this year, allowing significant expansion to its e-commerce business with the possibility of handling 4,200 orders per hour.

Primark 

Meanwhile, value fashion retailer Primark is focusing on bricks over clicks to boost sales. The company increased its retail space by 1.2m sq ft this year, with projections of a further 1.3m sq ft next year. Despite like-for-like sales decreasing 2% overall, which the company blamed on unseasonable weather and conservative customer spending, Ireland, Spain, France and Austria all showed consistent and positive performance. Exposure to fluctuating currencies saw operating profit margins decrease, an effect that was mitigated thanks to tight stock management, according to the company.

LOSERS

Asos

Proving all that glitters online is not necessarily gold, UK online retailer Asos saw its share price tumble in October as the company revealed a 31% fall in full-year earnings. Despite overall sales that rose 26% to GBP1.44bn, costs related to the exit of Asos's China business and trademark infringement disputes hurt the bottom line. The company was also slammed by the GMB trade union within Britain, who cited recent investigations into "serious concerns about conditions and working practices" at its warehouse operations.

Gap Inc

US retailer Gap Inc continued its troubled run this year with net income falling 17.7% to US$204m in the third quarter of 2016, from US$248m in the same period a year ago. The retailer has struggled to win back favour with customers, according to analysts, and has announced the closure of most of its UK stores by the end of fiscal 2016, part of an estimated 75 Old Navy and Banana Republic store closures this year. Net sales decreased 2% to US$3.80bn in the third quarter. For both the Gap and the Banana Republic brands, comparable sales slid 8%, while Old Navy sales rose 3% compared to the same period last year.

American Apparel

American Apparel's financial woes also reached a new low as the US retailer filed for Chapter 11 bankruptcy protection in November, the second time in just over a year. Struggling with more than US$310m in debt, slumping sales and corporate lawsuits, the company had attempted to implement a comeback plan after its initial filing in October 2015 but was unable to turn its fortunes around. Canada's Gildan Activewear offered to buy the brand in November, in a deal worth US$66m.

Abercrombie & Fitch

Teen apparel retailer Abercrombie & Fitch announced it will close its flagship Seoul store in January, also exercising a lease kick-out option for its flagship in Hong Kong. The company's third quarter results were described by analysts as "disastrous" with earnings down by over 80% to US$7.9m. Together with the flagship closures, Abercrombie says it expects to close about 35 US stores in the fourth quarter, taking total closures to 50, while seven new stores will be opened, five of which are in China.

Marks & Spencer 

Meanwhile, in a massive strategic shift, British retailer Marks & Spencer will pull clothing from 60 of its UK stores over the next five years and axe underperforming brands, dedicating the space to its food business. M&S announced it will close 30 UK stores and 53 international stores in the same period, including all ten of its Chinese operations and seven in France. The announcement came as pre-tax profit plunged to GBP25.1m (US$31.1m) in the six months to 1 October, from GBP216m in the same period last year.