In a sequence of store closings, layoffs, huge promotions, inventory reductions and stalled expansion plans, specialty retailers hoping to survive the economic crisis may have to use more than a scalpel to cut costs. With no signs of a letup in the recession and many secondary brands failing to gain traction with consumers, some retailers may be forced to wield an ax and sever their spin-offs, analysts said.
“In this kind of economic climate, with cash being king and [inventory] liquidation being essential, each business has to pay for itself,” said Dana Telsey, president of Telsey Advisory Group.
The fate of the spin-offs is certain to come under scrutiny now that retailers have finished their fiscal years and are preparing to release fourth-quarter and full-year results.
“Anything’s up for discussion,” said retail analyst Amy Wilcox Noblin of Pali Capital. “Retailers are seriously cutting back. No one knows when demand comes back.”
Intolerance for weak offshoots was building even before the recession hit with its full fury. An example is Pacific Sunwear of California Inc.’s departed urban-inspired spin-off, D.e.m.o. The brand shed 74 stores in spring 2007, before shutting down the remaining 154 stores in January 2008.
The closures followed a string of weak financial performances. For fiscal 2007, the retailer posted a net loss of $30.4 million on $1.45 billion in sales. The company said the PacSun division had an income from continuing operations before taxes of $218.6 million, on revenue of $1.31 billion, while D.e.m.o. put up a net loss from continuing operations of $106 million on sales of $148.3 million. For the year, D.e.m.o. reported a 19.6 percent comparable-store sales decline, while PacSun specialty and outlet stores posted a 3.4 percent comp increase. PacSun also elected to abandon its fledgling One Thousand Steps concept during the fourth quarter of fiscal 2007.
Pali’s Noblin said Bebe Stores Inc.’s athletic apparel concept, Bebe Sport, is a “business that has never proven itself” and may suffer a fate similar to D.e.m.o.’s. The recent departure of corporate chief executive officer Gregory Scott makes the situation “uncertain,” she added.
“It is no secret that Bebe has struggled with product and second concepts for some time in addition to a weak consumer,” Noblin said, noting that, over time, the retailer’s apparel has seemed to target a 30-plus customer, instead of its younger, core contemporary customer, making the management change “not necessarily negative.”
Retail analyst Eric Beder of Brean Murray, Carret & Co. said Scott’s decision to double the Bebe Sport chain over the past three years hurt the retailer, and that company founder Manny Mashouf, who has returned to the ceo role, should “aggressively reduce Bebe Sport, by either closing stores or converting them to Bebe or Bebe accessory stores.”
Beder described Bebe Sport as “outdated and unfocused, at best, and not worthy of management’s limited time right now.”
No new store openings are slated for the 63-store chain, company management said, as Bebe focuses on its newer outlet concept, 2b Bebe.
Although Bebe does not break down earnings by division, the company said it will continue to evaluate the marketing dollars for Sport, and will “reduce the total dollar spend if sales do not show improvement.”
Abercrombie & Fitch Co.’s 26-unit “post-collegiate” Ruehl is another struggling spin-off with no plans for new stores. Instead, A&F said it intends to focus on fine-tuning the concept, which generated $39.1 million of the parent firm’s $2.54 billion in sales in the first nine months of fiscal 2008. Ruehl’s comparable-store sales declined 22 percent during the nine months. Even the once-expansive Hollister was off 12 percent during the same period.
“I remain unconvinced that there is a market for Ruehl,” said Citigroup retail analyst Kimberly Greenberger, who observed that it is “very easy to target an age group,” or to let age “define a demographic,” but once a consumer is out of college that effort becomes more difficult.
Although her complaint can be applied to any retailer trying to box in 20- to 40-somethings, she said Ruehl’s “problem” is that it feels “meaningfully younger” than its rivals.
My character, Dinah Madani, is just the coolest, [most] badass woman imaginable," says @amberroserevah. The actress stars in @marvel's newest series on @netflix, @thepunisher. To prepare for her role, Revah sat down with Homeland agents to get a real sense of with Dinah's day-to-day life is really like. Read our full interview on WWD.com. #wwdeye (📷: @jilliansollazzo)
A scene from the 91st annual @macys Thanksgiving Day Parade. The parade, which boasts 50 million TV viewers and 3.5 million on-site spectators, is considered one of the largest and most watched parades in the world. (📷: Jason Szenes/EPA-REX)
The circus came to @bloomingdales 59th Street on Tuesday night and lit up Lexington Avenue with acrobatic dancers, death-defying knife throwing, sword swallowing and aerial acts with no net. The 45 minutes of theatrics built up to unveiling the holiday windows depicting @swarovski crystal-encrusted circus pieces and scenes from “The Greatest Showman” – songs from the soundtrack included. See the rest of the photos on WWD.com #wwdfashion (📷: Joshua Scott)
The psychedelic fashion that pervaded the ’60s is back with an exhibit at the @museumofcityny. “Mode New York: Fashion Takes a Trip” chronicles the changing styles from 1960 through 1973 and features designers such as @ysl, @oscardelarenta and more. The exhibition, which is on display through April 1, is organized into four periods: First Lady Fasion, Youthquake, New Bohemia and New Nonchalance. Pictured here is model Pat Bardonella during the Garvey Day Parade in 1968. (📷: @kwamebphoto) #wwdeye #wwdfashion
“People should be a lot more honest in expressing both the dark and light of themselves. We need to give each other the space to do that because it’s the only way we can grow and evolve,” says @noelwells of her new film “Mr. Roosevelt,” which is largely based on her own struggles. Unexpectedly leaving @nbcsnl in 2014 after just one season, Wells felt set back in her self-esteem and career trajectory. She quickly refocused her energy to more personal projects, which led to the completion of “Mr. Roosevelt.” Read the rest of WWD’s interview with the “Master of None” actress on WWD.com #wwdeye (📷: @jilliansollazzo)
@barbrastreisand is giving fans a chance to see her perform up close in a new concert series, which makes its debut on @Netflix today. From behind-the-scenes takes to her concert performance in Miami last December, the two-hour streaming special captures Streisand in her element. Pictured here is the singer/actress photographed for WWD in 1963. (📷: Palmieri Tony) #wwdeye #wwdarchive
@chanel and @pharrell dropped what’s being dubbed as the world’s most exclusive sneakers yesterday. The Adidas Originals NMD Hu, which Williams designed in collaboration with Chanel and @adidasoriginals, has a waiting list of over 120K people who pre-registered online at chanelatcolette.fr –– and only 500 pairs are on sale. The singer predicted the resale value of the shoes could reach $40K. Read the full interview on WWD.com. Link in bio. #wwdfashion (📷: Dominique Maître)
@imanshumpert is diving deeper into his creative endeavors and relaunching his clothing line, Post 90s, and is helping to raise money for the hurricane victims in St. Maarten with a jersey he’s designed with his brother. The Cleveland Cavaliers player talked to WWD about kneeling during the national anthem, working with fashion brands and how he wants to be more than an @nba player. Read the interview on WWD.com #wwdfashion (📷: George Chinese)