This week, everyone will be talking about the abrupt departure of J.Crew's CEO, Black Friday's shopping frenzy and growing pessimism about mass retailers on Wall Street. Read our BoF Professional Cheat Sheet.
J.Crew is expected to post financial results as soon as this week
Brett’s bold plan for J.Crew may or may not have worked, but now we’ll never know. Same-store sales grew for the first time in nearly four years in the previous quarter, though critics would argue this was accomplished via heavy discounting. Introducing sub-brands into J.Crew stores, while smartly bolstering the profile of fast-growing labels like Madewell, risked muddying the retailer’s identity and alienating core customers (Brett’s tenure draws parallels to Ron Johnson’s ill-fated attempt to remake J.C. Penney in that respect). J.Crew's board clearly wasn't happy with the the company's new direction. Still, Brett’s departure leaves the retailer without much of a strategy beyond shrinking to match lower revenues and a fading cultural footprint. One has only to look at Wall Street’s appalled reaction this week to Macy’s plans for smaller stores (or Sears’ recent bankruptcy filing) to see where that road leads.
The Bottom Line: J.Crew needs a new CEO and a new game plan, fast. Managed decline is not a winning strategy.
Retail’s Endless Black Friday
Forrester predicts online holiday sales will rise 14 percent to $151 billion
Amazon recorded 55 percent of online transactions on Black Friday 2017
Holiday store traffic fell 2.7 percent last year for US apparel retailers, according to Cowen
In the brick-and-mortar days of yore, Black Friday was best known for videos of shoppers stampeding into Walmarts and Best Buys. Today the crush is more like a trickle, in part because retailers realise a sale is a sale, whether it takes place at 5 am the Friday after Thanksgiving in a crowded store or a few days before online (little other than semantics separates this week's “fall sale” at Nordstrom from Amazon’s “Black Friday deals week”). Walmart, Target, Kohl’s and Macy’s are preparing to demonstrate how they’ve reinvented the retail experience to lure back phone-addicted shoppers. But Amazon got the jump on all of them, rolling out its deals starting last week, much earlier than last year.
The Bottom Line: Black Friday is in some ways a relic of retailers' discount-happy past. Many now see tighter inventories and fewer sales as a better approach to managing their brands.
Luxury brands were hit last month by concerns about Chinese spending, future US growth
Urban Outfitters, T.J. Maxx, L Brands and Gap among the retailers reporting earnings this week
Consumer spending is up, and so are profits. So what explains the decline in retail stocks, indiscriminately hitting both perennial under-performers like J.C. Penney and high-fliers like Abercrombie & Fitch? A similar dynamic already played out among luxury brands last month, when fears of a slowing Chinese luxury market sent Kering and Prada tumbling. Macy's and Gap rely on China for manufacturing rather than consumption (and didn't have as far to fall after weathering years of doubts about their futures). But economic fears are going global, and cheery forecasts for holiday sales can't drown out mounting concern that the retail sector's best days may be in the past. A raft of earnings this week should help clarify the overall picture.
The Bottom Line: Retail's best days weren't all that good for many mall brands. If the US economy tilts into recession, the fallout could be brutal.
COMMENT OF THE WEEK
"This is why you need an empowered diverse workforce in HQ as well. It would've taken a black woman two seconds to notice this and if she felt like her voice would be heard, she would've spoken up in time to fix it. Now, this campaign got talked about for all the wrong reasons and even worse, it alienated potential customers."