Retail’s slow steps towards a new normal
18 MAY 2020
More countries in the West reopen shops as the conversation around the need to change the fashion system picks up among industry players.
Retailers in many countries are back in business as lockdowns ease, but they are operating under tight hygiene and distancing controls.
Luxury group Richemont’s gloomy warning of up to three years of economic slowdown reflected another week of bleak news.
The Covid-19 crisis is prompting an ongoing debate about the fashion system, with leading retailers and designers seeking to reshape fashion season timings.
Retailers are reopening worldwide, but no one in the fashion and luxury industries is expecting a return to business as normal. As JC Penney joined the lengthening list of American retailers seeking bankruptcy protection, a downbeat mood prevailed. Switzerland-based luxury group Richemont announced an 18 per cent drop in sales for its fourth quarter and warned of a long haul ahead.
Here, Vogue Business highlights the latest news from the luxury industry and related sectors.
Fashion retailers in the West cautiously reopen. Fashion retailers across North America and Europe are joining a global reopening, following strict hygiene and distancing controls. One week into reopening across France, Claudia D'Arpizio, Bain & Company partner, said feedback was rather positive. “We saw a pattern similar to China: lower traffic but higher conversion rate.” Department stores and shopping centres of over 40,000 sqm in the Île-de-France region around Paris remain closed until at least 10 July.
Stores across Italy are also reopening. However, business association Confcommercio predicts consumer spending on fashion will slump by 20 per cent this year, and a quarter of Italy’s 115,000 fashion retailers will collapse. Fashion retailers remain closed in the UK.
Meanwhile, on 15 May American department store group JC Penney became the latest debt-laden retailer to file for bankruptcy during the pandemic. The company has $500 million in cash on hand and has reported commitments for $900 million in financing from existing lenders to fund bankruptcy. As many as 200 of its 850 stores could close. “The American retail industry has experienced a profoundly different new reality,” said CEO Jill Soltau in a statement.
Long-haul warning from luxury, online retailers see opportunities. Reporting an 18 per cent fall in sales in its fourth-quarter, luxury group Richemont was downbeat about the prospects of a bounceback. “No one can say when we will see economic activity normalise. We may be looking at 12, 24 or 36 months of grave economic consequences. Perhaps that is too pessimistic but who knows?” said chairman Johann Rupert in a statement.
On 22 May, Burberry is forecast to report operating profit for the year down 23 per cent to £337 million and may cut its dividend. In Japan, heritage brand company Renown, part-owned by China’s Shandong Ruyi, filed for bankruptcy on 15 May.
Companies that are unencumbered by heavy debt have been less disrupted by the pandemic thanks to their strong online presence sense opportunities. UK online retailer Boohoo, which has reported robust trading, raised £198 million through a share placing on 14 May to fund acquisitions. The company said it would “take advantage of numerous opportunities that are likely to emerge in the global fashion industry over the coming months”.
E-commerce soared in the month of April worldwide, with the general retail sector experiencing 209 per cent growth compared to the same month last year, according to an analysis by ACI Worldwide of hundreds of millions of e-commerce transactions. In the US, online apparel sales rose by 34 per cent year-on-year on the back of heavy discounting, according to the latest data from Adobe’s Digital Economy Index.