More Bankruptcies, More Saviors: Apparel Brands Have Troubles
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While on the surface, retail “roll-ups” of distressed companies seem like a good idea, in practice, they just don’t work out all that often.
The past few years have been particularly active. I confess, I am having a hard time keeping track of all the various investing “bottom fishers” going after apparel brands and retailers either already in bankruptcy or on the verge of it. Ascena Retail Group bought up a lot of those brands, like Ann Taylor, Lane Bryant and others. That, I knew.
But it turns out that Ascena is bankrupt as well. Somehow in the middle of this timeless, long-short-strange year of 2020, Ascena declared in mid-July and I must’ve missed it. Now, Sycamore Partners has snapped up any brands Ascena hasn’t already sold (Justice, Catherine’s plus, and Maurice’s, as examples were already sold). The “premier” brand in this final sale is Ann Taylor.
This both re-affirms and disrupts my overall retail mindset.
Reaffirmation: Buying up a boatload of failing retailers leads to….a larger failing conglomerate. I worked for a retailer back in the 90’s that used its free cash to do just that. It’s focus was shoes, but it expanded out into other apparel categories as part of its strategy. My employer was one of the shoe companies snapped out of Chapter 11. I didn’t work there long, since part of their assumption for earnings improvement was the elimination of separate service groups like IT. Instead, they converted existing systems to their own home grown (and not-great, if I’m honest) systems. That retailer has since gone bankrupt and was bought up by yet another fair-to-middling retailer. That retailer no longer shows up in any google search either.
Proof once again that expense cutting does not a successful retailer make. And bigger isn’t better.
Disruption: I have been writing and speaking a lot lately about the partnership between Simon and Authentic Brands. What I’ve been calling the “verticalization of malls” seemed to me like one way to keep malls alive in a post-pandemic world. I equated it with a department store, which has a combination of private label and branded product. Would consumers care that Brooks Brothers was partly owned by the mall itself? Of course not.
Well, I forgot something. There was a reason these brands were failing, and expense cutting wasn’t the problem: the top-line and consumer tastes were. My hope was that healthy retailers would join in, mall operators would provide powerful experiences to bring consumers into their facilities, and food and fun would keep them there, shopping and generally making everyone involved successful.
So where do we go from here? It seems brands have a lifespan, just like everything else in this world. Trying to resurrect a dying brand because there’s an assumption of “brand equity” can be productive if the brand still has cache with its target audience, but if the brand’s customers have aged out of the market or moved on to brands they perceive as more relevant, it’s a hopeless cause.
The questions apparel retailers need to ask themselves is “How do we stay relevant? Especially in a generational shift, or a lifestyle shift or whatever the heck 2020 was?” Of course, technology is part of the picture. Like magic, BOPIS, BORIS and other forms of contactless selling became table stakes in 2020. While the incidence of contactless sales may decline some once a vaccine is ubiquitous and the pandemic comes to an end… but it’s not going away. And… sustainability is on the rise, whether retailers believe it or not. Climate change is on the consumer agenda. Wildfires, hurricanes, crazy hot weather are all issues consumers are aware of. Ask yourself, what do you want to be known for? And will it stick? Will consumers care?
The new year is coming. It’s time to start looking forward. And stop trying to resurrect dead brands from the past.