(Wall Street Journal)
Elizabeth Winkler June 3, 2019 7:00 a.m.
Retailers’ earnings season has gone from bad to worse. The bleeding intensified last week, with shares of Abercrombie & Fitch plummeting 26% on Wednesday, the biggest percentage decline since the company went public. PVH Corp., owner of brands including Van Heusen, Tommy Hilfilger, and Calvin Klein, dropped 10% that day, too. On Thursday, women’s wear chain J.Jill was down a jaw-dropping 53% and on Friday, Gap Inc. slid 9%.
It is hard to miss what all of these retailers have in common: They are mall-based.
While retailers posted generally strong numbers in 2018, raising hopes of a retail renaissance, this year has seen a reversion to the pre-2018 trend: department stores and mall-based retailers giving up share to discount stores and e-commerce. The perceived renaissance now seems to have been largely a function of lean inventories, not an actual increase in demand. Now inventory is high again, and retailers are resorting to promotions.
Gap, for example, warned Friday that it may have to rely on promotional activity in coming months to move unsold merchandise off shelves. That will weigh on gross margins. The company, which posted its weakest quarterly sales in three years, has suffered not merely at its namesake brand, where comparable-store sales were down 10% for the quarter, but also at Old Navy, typically its best performer. Comparable-store sales there fell 1%. By comparison, in the same period last year they climbed 3%.
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