ICR

ORLANDO, Fla. — Wall Street sunk its teeth into central Florida on Monday as investors gathered here for the annual ICR Conference, where fashion executives were laying out holiday results and setting up the year ahead. 

“The landscape in retail is changing every 30 seconds,” said Fran Horowitz, chief executive officer of Abercrombie & Fitch Co., at the start of the conference, held at the J.W. Marriott Ritz Carlton. “It’s a pretty crazy and fun industry to be in, but it’s changing rapidly.”

That was the state of mind as investors and more than 200 public and private retail companies — including Guess, American Eagle Outfitters, Chico’s FAS, Lands’ End and Abercrombie & Fitch — kicked off the 22nd annual investor conference. 

While change seemed to be the only constant, executives and retail industry veterans hinted at a few ongoing trends, such as store closures, international expansions and more innovation in the retail industry. 

But few things in retail are cut and dry. Take store closures. While some retailers are closing stores as they pivot or renew focus on digital growth, others are looking to optimize their store fleets by updating existing locations. And some said brick-and-mortar locations are an opportunity for more growth. 

“If you’re in the retail real estate business, staying in the status quo is not an option, not a viable option,” said Ben Schall, president and chief executive officer of Seritage Growth Properties. “In our line, it’s going to be a continued evolution of business. And that means different things to different people.

“In the mall, it’s not a need for additional retail,” Schall said. “It’s finding different uses that you can attract people to some of those mall sites so that they can really start to become hubs of activity for the broader community. It very much speaks to the kind of environment we’re trying to create, very much in the experiential arena, categories [such as] off-price, fitness and service.” 

Nick Wibbenmeyer, managing director of Regency Centers, added that as e-commerce continues to influence consumer behavior, brick-and-mortar locations are actually a value investment for consumer companies looking to acquire new customers.  

“Historically, retail consumers online could be acquired very cheaply,” Wibbenmeyer said. “But as Facebook, as Google, as your platforms have realized the power they have, the price of reaching those consumers has increased dramatically. The customer acquisition costs for brick-and-mortar [now] is pretty attractive.” 

Meanwhile, many retailers see apparel as the quickest way to drive growth. 

“As we produce the right product, she will come,” said Jennifer Ellis, chief financial officer of Chico’s FAS. 

But technology, like artificial intelligence, will be the key to determining which products are marketing to which consumers. 

“Technology, it’s a never-ending cycle of chasing what’s that next move,” said executives at footwear retail company Genesco. 

Here, highlights from the conference.  

Abercrombie & Fitch

Abercrombie & Fitch is ramping up its store closures with optimization in mind.  

Last year, the retailer, which operates its namesake chain as well as Hollister and Gilly Hicks, said it had plans to close three of its Abercrombie flagship locations. The most recent casualty on 56th Street in Manhattan. But it doesn’t end there. 

“We have an opportunity in 2020 to continue to close some more,” Horowitz said. 

The company began 2019 with 19 Abercrombie flagships and plans to end this year with just 12. 

“We don’t have a need for these,” Scott Lipesky, chief financial officer of Abercrombie & Fitch, said during a fireside chat at the conference. “That was a good strategy for us back in kind of 2008, 2009, 2010. But the customer has changed so dramatically since then with everyone, just that the flagship is the phone as we think about it today.”

Horowitz added that many of retail’s biggest bankruptcies in the last few years — like Sears and Barneys New York — are opportunities to snatch up coveted real estate for less money. 

“We closed our SoHo flagship [in Manhattan] for Hollister this past year and coincidentally — it was not planned — there was a bankruptcy over on 34th Street,” Horowitz said. “We were able to move into that, into that building with a fairly shorter-term lease, less expensive buildout and half the square footage. And that store is now tracking for Hollister to be one of our best stores. 

In addition, the company will be incorporating more AI for personalized marketing in an effort to target individual shoppers online. 

“We have a lot of data on our consumer,” Horowitz said. “So what we’ll be able to do, for example, if you are particularly a denim shopper, we can cater your e-mail much more toward your interest in denim. We’re going to be much more specific consumer-by-consumer as time goes on. We like to talk about our omni business because that’s really the most important customer to us today. The consumer who shops with us on both channels is when we really win.”

Earlier that morning, the company reaffirmed its fourth-quarter guidance, with top-line revenues expected to be flat to 2 percent compared with the same time last year. The stock jumped nearly 7 percent during Monday’s trading session to close up 4.11 percent to $17.99 a piece as a result. 

Lands’ End

Lands’ End is moving out of Sears stores in the U.S. and moving on with Amazon

The brand, which was bought by Sears and then spun off, and is now looking to the future with the e-commerce leader.

“It’s bringing us new customers and that’s why we went there,” said Jerome Griffith, chief executive officer and president of Lands’ End. “Over 50 percent of the customers [on Amazon] have never shopped at Land’s End before. So they are now getting exposure to the brand. Another 25 percent of those customers are lapsed customers, customers who haven’t shopped with us for five years.”

The company plans to close its remaining Lands’ End shop-in-shops in Sears stores by the end of the month. 

“I’m happy to say that we’ve been able to exit out of the Sears exposure with very little to no impact,” Griffith said. 

The remaining 29 Lands’ Ends located in Sears stores are in the final stages of liquidation, leaving the company’s only business with Sears overseas. 

Shares of Lands’ End rose 2.7 percent to $15.52.

Chico’s FAS

Intimates and lingerie brand Soma continues to be Chico’s FAS’ biggest growth driver. While other retailers are shuttering stores — including Chico’s nameplate brand, which said in January 2019 that it would close 250 locations over the next three years — executives at the firm said there’s opportunity to open Soma new locations. 

“We’re investing in the Soma business,” said Ann Joyce, Chico’s executive vice president and chief operating officer. “Soma has a wonderful product innovation pipeline and I think that is resonating with our consumer and it’s providing solutions. We know that when we deliver the product that the customer wants, that this business really generates cash.” 

With just under 300 Soma locations nationwide, Joyce said there’s significant opportunity to grow the store fleet, and in new markets. 

The company’s stock closed down 0.5 percent Monday to $4.16 a share. 

American Eagle Outfitters

American Eagle Outfitters reaffirmed its fourth-quarter guidance and reported a strong 2019 holiday shopping season Monday morning — and company executives at the ICR conference attributed that to the firm’s denim and Aerie businesses. 

“We are the jeans destination for this generation,” said Chad Kessler, American Eagle global brand president. “Our priority in 2020 will be to continue to lead on the momentum of the AE jeans business.” 

“I feel very positive and optimistic about the jeans going into 2020 and even beyond,” Kessler said. “We’ve we just launched our new Dream Fit for the second half of holiday and we’re having a hard time keeping it in stock. I think that will continue. We have the broadest assortment in terms of fit, wash, the highest value and best quality out there. And since we sell directly to our consumers, as opposed to a lot of our competitors at wholesale, the level of value that we can offer the customer without having middlemen in between us and the customer is really remarkable.”

Meanwhile, the Aerie brand also continues to grow. In fact, Kessler said the brand is “probably the most enviable brand in the marketplace right now.” 

“There’s such brand love,” he said. “Aerie really holds such a modern position as a brand of empowering young women to feel positive about themselves, and to give them confidence.”

Aerie only has a significant store presence in about 20 states, Kessler estimated. (The company has plans to open about 60 more Aerie stores this year, the majority of them stand-alone locations).

“The halo that comes with [opening brick-and-mortar stores] in online sales, we see almost a one dollar-for-dollar sales growth online when we opened [new stores],” Kessler said. 

The company’s stock closed up 3.2 percent to $14.60.

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