The Fashion Week Tour has started, yet the fashion business becomes more precarious. This year the challenges are too big to bury our heads in the sand. While we sit on rows during shows, mingle with each other over a sparkling wine, the warning bells are ringing louder.
Stores Going Wrong
Macy’s, the American retail institution announced the closing of 125 stores, including a Bloomingdales. As a major mall anchor store this is bad news for brick and mortar traffic.
John Lewis, the British High Street staple faces a turbulent future. Sharon White, group head, warned store closures are on the table. The vulnerable department store is having trouble attracting in store clients.
The other Knightsbridge Department store, Harvey Nicols struggles with not so fabulous numbers.
Dallas based luxury chain Nieman Marcus carries over $5 billion in debt. I saw their buyers at a fashion week event. I wondered what were they buying. When a retail chain holds a liability of that size, the space for maneuvering is limited.
A Ripple
The Big Elephant in the Room, a new virus, Coronavirus. A little known city, at least from my point of view, of 11 million inhabitants, Wuhan, has become the epicenter of a possible pandemic. The second largest economy on the planet, closed until further notice. The ripple effects, or tidal wave, are being felt.
Every major fashion house and corporation have large investments in the Middle Kingdom. The short term outlook looks bleak. Chinese consumers count for 30% of luxury goods. Most stores have closed. Burberry reported an 80% sales drop. Is this an harbinger of things to come? We can expect profits shocks in the near future. Secondly, many luxury city destinations will take a hit. With all flights to China cut, retail outlets in Paris, London, and New York will see falling numbers from fewer tourists. More concerning, the light at the end of the tunnel is still out of sight.
Increased Unknown
Supply chains have come to a stand still. The interruption will possibly be felt by consumers in September. Adidas, Uniqlo, H&M, Gap, etc are heavily dependent on closed Chinese factories.
Fast Fashion junkies could see an increase in price. Production and logistics will have to be re-thought. The “Made in China” imprint has taken a hit. Brands must come-up new solutions to avoid future interruptions. These may involve moving factories to new locations, perhaps back to USA or Europe.
Yes, there will be some interesting conversations during these fashion weeks.