APPAREL

Is Fast Fashion Headed for a Deep V-Neck Recovery?

I owe an apology to some of fast fashion’s titans. Like Crocs and Outer Banks before them, I may have underestimated their appeal.

By the tags...

Inditex returned to profitability after an earnings scare—its first-ever loss—in June. The Zara owner bounced back with help from 1) a 74% jump in online sales and 2) the reopening of 98% of its stores.

H&M expects to post a profit in Q3, surprising analysts. H&M hasn’t shared full results yet, but signs from its stores are promising: Only 200 of its 5,000 stores remain closed and customers are coming back in droves. 

Next earned its Retail Brew debut after raising its guidance for the second time since the pandemic started. The U.K. brand anticipates generating roughly $388 million in annual profit, on the back of its “resilient” online business.

• And it’s expanding, after acquiring the U.K. branch of Victoria’s Secret from L Brands.

A closer look 

It takes more than a well-timed sweatpants drop and a restaffed register to fully rebound in this economy. We’ve seen other apparel makers post losses despite sales gains in cozy clothing; in the U.S., overall clothing and accessories sales still declined 24% YoY in August. So what’s the fast fashion difference? 

Price. In a recession, shoppers generally prefer low cost over quality. Fast fashion retailers are structured to keep consumer prices below sea level. 

• H&M also managed to reduce its reliance on markdowns throughout the pandemic, hitting the affordability sweet spot without further compromising its margins. 

Inventory management. This one’s specific to Inditex, but important. By the end of July, Inditex whittled down its stock in trade by 19% with the help of flexible suppliers. At the beginning of the pandemic, Inditex used advanced tech to funnel clothing from closed stores to e-comm; with room to adjust orders as demand shifted in real time, it also reduced unsold skus. 

Bottom line: It’s too early to say that fast fashion has 100% recovered. But as every apparel maker tries to jump on the same quarantine trends, fast fashion is pulling ahead.

STRATEGY

Tractor Supply and Demand 101

Tractor Supply opened its 1,900th store yesterday, one of up to 80 new stores this year. In any year, it’d be a milestone; in a year when 25,000 stores are likely to close, it’s remarkable. 

Key stats: While few brands are reporting same-store sales due to pandemic disruptions, Tractor Supply’s rose 35% last quarter. And sales grew by double digits in every category—even apparel. 

How did Tractor Supply plow ahead?

It started with geographic advantages. CEO Hal Lawton attributed some of Tractor Supply’s success to customers discovering its stores when they moved to more remote areas with fewer options. 

But the retailer’s playbook also includes strategies any retailer can implement.

1. Knowing your niche. Tractor Supply’s core products are in its name. But it stocked its stores with ancillary lifestyle items and services, which could eliminate trips to competitors.  

2. Adapting early. While department stores only discovered curbside enthusiasm this summer, Tractor Supply was already on season four. Tractor Supply implemented BOPIS and updated its e-comm app years ago—so when shoppers started demanding distanced shopping solutions, it wasn’t caught with its overalls off.

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RENTAL

Unlimited’s the Limit

One month after closing its five stores, Rent the Runway is eliminating its Unlimited rentals membership. 

The reasons: One, no one notices if you wear the same Zoom top two days in a row. Two, members who paid for Unlimited had pretty limited behaviors.

• 70% of RTR Unlimited members ordered eight items or fewer per month. 
• Only 6% of RTR Unlimited members ordered 16+ items per month. 

Is this...a turnaround strategy? Good things don’t usually come to those who pen open letters, but CEO Jennifer Hyman may be on to something here. Switching to a pay-per-use model will save the rental company on shipping items and processing returns. Hyman also claims processing fewer orders will help RTR meet its sustainability goals.

Looking ahead...rental companies don’t need us to go back to the office; they just need us to go outside. Besides RTR, rental services Everlasting Wardrobe, The Rotation, and Switch said subscriptions are slowly picking up as select venues reopen and shoppers reconsider their pants boycotts.

WHAT ELSE IS BREWING

• CVS will double its Covid-19 drive-thru testing sites by mid-October. 
• Amazon will open 1,000 warehouses in suburban areas, Bloomberg reports. 
• Ugg’s fashion rebrand continues with a Telfar collaboration. 
• Ascena could sell its Catherines brand for more than double its original offer.
• Uniqlo will sell its first product upcycled from customers’ old purchases this fall.

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SWAPPING SKUS

My Friday evening plans: a glass of Chardonnay, a quick change from my daytime sweats to my nighttime sweats, and this pile of supply chain reads. Don’t look so surprised. The shipping drama could inspire the next Shondaland show.

• This explainer on why sold out notifications are increasing online may be the most legible supply chain story to hit the internet. (The Atlantic)
• In Kansas City, Chewy’s experimenting with a new kind of warehouse. Its purpose? Fulfilling orders from unexpected pet product spikes. (Supply Chain Dive)
• Buying up the latest supply chain tech doesn’t guarantee efficient e-comm logistics, Kroger’s pandemic experience teaches us. (WSJ)

FRIEND OR FAUX?

You know the drill: Choose the counterfeit retail story from the bizarre-but-true lineup.

1. Mall Santas will return to Brookfield Properties centers on October 1. 
2. Ikea’s newest spokesperson is a CGI influencer.
3. Tags on Patagonia shorts tell shoppers to “Vote the a—holes out.”
4. McDonald’s trains employees to recognize Travis Scott catchphrases.

ICYMI

Catch up on the Retail Brew stories you may have missed.

• Can Retailers Replace VC?
• Inside the DTC Pet Brand Boom
• Maybe Fashion Month Shouldn’t Be Virtual

FRIEND OR FAUX? ANSWER

1. Nope, the mall Santa tradition isn’t starting as early as holiday sales this year. But while I have you...don’t forget to take our Black Friday/Cyber Monday survey.