Clothing Stores Fight Back Amid the Covid Wreckage

(Bloomberg Opinion) -- The pandemic has made for an extremely difficult environment when it comes to selling clothes. With no parties on the calendar, no meetings to attend and no vacations in the offing, shoppers have had little reason to go on a spree for new outfits, and the enticement of hunting the racks for something new has simply evaporated. As a result, data from the Commerce Department shows that clothing stores’ Covid sales slump has been the worst of any format in retail — even restaurants. 

A wide variety of clothing-centric retailers reported sinking sales in the latest batch of quarterly earnings reports, from traditional department stores to specialty chains and even online upstarts. Now, many are trying to plot a way back. Here’s a rundown of some of the ways different types of clothing sellers are coping in the face of what Kohl’s Corp. CEO Michelle Gass called “the worst retail environment in our nearly 60-year history,” and my assessment of how likely such efforts will help:

TJX Cos., the off-price juggernaut: TJX has been among the best-performing clothing retailers in the U.S. for years now, enjoying steady sales growth despite mostly staying out of the e-commerce fray. The decision to shun digital formats is being seriously tested now, though, with comparable sales in the division that includes Marshalls and T.J. Maxx falling 6% in the quarter from a year earlier amid a decline in traffic to stores. Job No. 1, then, is making those physical stores feel as welcoming and safe as possible. With that in mind, the company has installed protective shields at checkout and has removed some racks so visitors can move around more easily and maintain a social distance. Those are smart moves that should help encourage repeat buying from the shoppers who choose to walk through their doors. But I worry these steps, and a planned ramp-up in marketing spending, won’t be enough to override emerging preferences for avoiding unnecessary store trips. Good thing the company can count on its HomeGoods chain, which saw booming comparable sales in the quarter amid a wave of DIY decorating and renovation that has been catalyzed by stay-at-home lifestyles. And smart that it is loading up on pack-away inventory that it can probably get at a good price given the glut of clothing that has gone unsold in recent months.

Kohl’s , the ubiquitous department store: Kohl’s suffered a 23% sales drop in its latest quarter from a year earlier, and its shares have slumped more than 60% year to date. The chain is wisely trying to steer its merchandise assortment toward more casual attire, a pivot that should be reasonably successful given how strongly its workout wear category has grown in recent years. The department store is also trying to capitalize on the misfortunes of its peers, using geo-targeted marketing to lure customers in towns where competitors are closing stores.  Kohl’s has had success with this tactic in the past when Bon-Ton stores went out of business. But I’m not convinced it will be as effective amid the pandemic, when shoppers don’t have any pressing need to give an unfamiliar clothing store a chance. Kohl’s is expecting an earlier start to holiday shopping this year, too, and is planning its merchandising and discounting strategy accordingly. This might end up being a mistake: While people will undoubtedly be looking to avoid crowds, and starting early is a way to do that, there will also be tremendous uncertainty in October around the stability of their employment situations and what form their December celebrations can safely take. Uncertainty is already appearing to push back-to-school shopping later into the calendar, and it is possible holiday shopping could take a similar turn. 

Revolve Group Inc., the digital wunderkind: Revolve, a buzzy e-commerce fashion business catering to Gen Z and Millennial women, was well-positioned for the way the pandemic has pushed shoppers to embrace more online shopping. But dresses and other going-out attire typically make up a major portion of its selection, a disadvantage when so many people are shut in at home. Despite a 12% decline in quarterly net sales from a year earlier, there were bright spots, including Revolve’s nascent beauty business, which grew more than 100% in the period. The company plans to lean harder into taking market share in the beauty category, including by adding more brands. This is a smart strategy, in part because it allows it to snare more dollars from the loyal shoppers who already know the site for clothing. Plus, beauty products tend to have lower return rates than apparel, which helps with profitability. Revolve is making other tweaks, too, including temporarily shifting more of its focus on outside brands. Building coveted private brands has been a key part of Revolve’s growth to date and will be over the long haul. But Co-CEOs Mike Karanikolas and Michael Mente told me in an interview last week that the decision comes down to production economics, which get less favorable when you’re placing smaller orders. So if Revolve can, for now, devote more of its product mix to third-party brands that it can buy in smaller quantities, that should help it weather the storm.

Victoria’s Secret, the struggling specialty store: The pandemic has added to a long list of woes for Victoria’s Secret, which include years of out-of-touch merchandising and marketing and recent allegations of a pervasive culture of harassment. In the second quarter, the brand’s sales fell 39% from a year earlier, its corporate parent L Brands Inc. reported on Wednesday. It was clear during a Thursday earnings call that executives believe a successful holiday season hinges on figuring out how to flow foot traffic through stores safely without sacrificing too many potential customer visits. In addition to testing ideas to try to pull forward some of that holiday spending to earlier in the season, the company said it is experimenting with mobile checkout capabilities so it can prevent associates and customers from clustering at cash registers. These are worthwhile ideas, but I suspect they can only help around the edges. Perhaps the most important change brought on by the pandemic is one that was less visible to customers: Executives said the situation has pushed them to be much more conservative with inventory buys. The result is that it doesn’t need to resort to excessive promotional activity to get rid of stuff — an important step toward shoring up profitability and getting shoppers to see the brand as more aspirational. 

No matter what these companies do, the upcoming holiday season is going to be a gauntlet like none before. But at least each is taking an approach to recovery that is tailored to the specifics of its format and customer base. 

The retailer didn't specify which retailers' customers it was going after, but it's a safe bet that J.C. Penney Co., which filed for bankruptcy earlier this year and is closing stores, is one of them.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Sarah Halzack is a Bloomberg Opinion columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.

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