Global Brands Group is moving to match the market — and the market is moving fast.
Rick Darling, chief executive officer, in discussing the company’s fiscal year results on Wednesday, laid out the dramatic restructuring it has put in motion over the past year and offered a macro take on the industry that signaled just how much change is needed now.
Global Brands’ continuing operations saw net losses narrow to $400 million in fiscal 2019 from $903 million the year before, as sales fell 4.6 percent to $1.51 billion from $1.59 billion. The company is in the process of slimming down to move faster. It sold its North American business for $1.4 billion to what is now Centric Brands and has also been looking to operate more efficiently, moving to cut $170 million worth of total annual expenses — well above the $100 million targeted.
As the company has reduced its reliance on the Americas, which used to make up 95 percent of its business and now accounts for 58 percent of the total, annual sales have been cut by over 60 percent. The firm’s 25 grade levels for its workforce have been reduced to 11.
“This has been a very transformational year for GBG,” said Darling, who sounded a note of urgency.
And it’s not just the looming threat of an additional 25 percent in tariffs on apparel made in China, where Darling said Global Brands is planning to expect them in September.
The ceo also said that U.S. store closures are continuing, that stores are using their space in new ways or letting it go dark and that digital start-ups are going to grab serious market share.
He noted that 15,000 U.S. stores have closed since 2017, with 5,000 stores shuttering already this year — a fast pace.
“We think that stores are going to continue to consolidate,” Darling said. “A lot of those store closings are with existing retailers that are just continuing to downsize their fleet. The other thing that’s happening from a square footage standpoint is that even stores…that aren’t necessarily announcing big changes in their store fleet, are actually taking portions of their store, walling them off and turning them dark.”
To contend, Global Brands is thinking both technologically and strategically.
About a quarter of the company’s product development is now being done virtually with 3-D design.
“We’ve eliminated the actual need to have physical samples in categories like Calvin Klein footwear, where Macy’s is our biggest client,” Darling said. “We now work with Macy’s on a 3-D basis, so it eliminates the need to actually build those samples.”
And as many of the bigger retailers contract, Global Brands is looking to the upstarts.
“In the U.S., the whole emerging area is now being looked at, over the next four or five years, as potentially being one of the biggest growth areas in the industry,” Darling said. “And that obviously is going to be taking market share from the traditional brands, something that GBG is looking very seriously at in terms of how we might play in that arena going forward.”