Reading the State of Retail in Fashion’s Quarterly Reports

There’s no perfect read on this extraordinary moment in retail history — but Walmart Inc., Target Corp., Ralph Lauren Corp., VF Corp. and Macy’s Inc. together gave a kind of synopsis of the situation in the U.S. with their quarterly updates last week.

The pandemic is waning in the U.S. and Europe as vaccinations rise, consumers are coming back out (buying dresses, but staying casual) and the start of the new normal could be here after more than a year of hibernation. 

Many companies went bust in the pandemic, but the strongest players did their best to position themselves to try to catch the boom afterward — and now they’re starting to go for it. 

It’s an uncertain mad scramble for what’s next, with fingers crossed that some new COVID-19 variant doesn’t slow it all back down. 

Here, a look at what the industry learned last week as some of the biggest U.S. players opened their books and started talking more about the future now that they’re on firmer ground. 

Cash Is Still King

Amid the human tragedy of the coronavirus was a downright financial emergency — and it was the chief financial officers who had to act. They stepped in to cut costs and started storing up cash, while many also moved to cut their debt. Some companies have let loose of the purse strings — VF Corp. made its move to snap up Supreme in a $2.1 billion deal. But many are still sitting on a pile of cash that could be put to work as the industry continues its fast-forward transformation.

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Cash On Hand Vs. Debt

The fashion COVID-19 playbook generally called for squirreling away cash and cutting debt.

Date Cash, Short-term Investments

(in billions)

One-year Change Total Debt

(in billions)

One-year Change
TJX Cos. Inc. 5/1/21 $8.8 104.7% $14.8 -10.1%
Target Corp. 5/1/21 $7.8 70.5% $15.2 -8.7%
Walmart Inc. 4/30/21 $22.8 53.0% $62.8 -18.0%
Ralph Lauren Corp. 3/27/21 $2.8 31.2% $3.6 12.2%
Macy’s Inc. 5/1/21 $1.8 18.1% $8.0 -6.6%
VF Corp. 3/31/21 $1.4 3.3% $7.0 33.5%
Kohl’s Corp. 5/1/21 $1.6 -21.1% $6.3 -18.4%
Source: S&P Capital IQ

Leaner and Meaner Leads

The crisis focused the corporate mind and many business models. The mantra for the strongest in 2020 was centered on coming out of the pandemic even stronger. That translated into efforts to cut costs, stores, real estate and focusing in on a company’s strengths. 

Ralph Lauren Corp. took over $700 million in sales out of its business last year as it shifted Chaps to a licensed model, agreed to sell Club Monaco, left more than 200 U.S. department stores, cut its off-price business and moved to reduce daigou sales. 

That has freed the company to build on its namesake brand and move prices higher — average unit retail prices at the company rose 26 percent last year and are on a four-year tear. 

“We view our brand as bigger than our business,” said Patrice Louvet, president and chief executive officer, who is especially pumped up about bringing 4 million new customers into the company’s direct-to-consumer network last year.  “Typically these new consumers are higher-basket size, higher profits from a gross margin standpoint and younger, so really an exciting profile,” he said. 

Party Hearty Ahead 

Jeff Gennette, chairman and CEO of Macy’s, said customers are ready to get out and spend — and keep spending. 

“You’ve got customers with very low credit card balances, lots of open to spend, and to varying degrees they’ve been cooped up over the last year,” he said. 

“This will be a gigantic gift holiday. We are approaching it that way,” Gennette said, projecting strong demand in fragrance, fine jewelry, boots, handbags and home categories. 

And New Year’s celebrations? The CEO is looking for them to “be at a whole other level.”

Keeping Habits 

As the world opens back up, most expect consumers to change again, rolling into the future instead of reverting back to where they were in early 2020. But as shoppers evolve, they are starting from an outlook that’s been shaped by a year spent closer to home for many. 

Michelle Gass, CEO of Kohl’s, said: “Consumers will continue to live more actively and casually as normalcy returns. As more people return to work, resume travel and attend events and gatherings, they are seeking out new and updated apparel while maintaining the preference for casual comfort, which fits squarely into the product categories we are taking a leadership position in. Against this backdrop, Kohl’s is positioned really well.”

Staying Essential 

While much of the industry was put on its back foot by the COVID-19 lockdowns, the broad line giants — especially Walmart and Target — were able to stay open and curry favor with shoppers as they doled out groceries and other essential items. And as the world has opened back up, they seem to be benefitting from the momentum.

Brian Cornell, chairman and CEO of Target Corp., said, “Market-share gains of more than $1 billion in the first quarter, on top of $1 billion in share gains a year ago, demonstrate Target’s continued relevance with our guests, even as they have many more shopping options compared with a year ago. Our performance in the first quarter was outstanding on every measure and showcased the power of putting our stores at the center of our strategy.” The mass merchant used stores to fulfill the majority of its online orders. 

Stores Star

After a year of amped-up growth of e-commerce, retailers are able to again accentuate their brick-and-mortar operations. For T.J. Maxx and Marshalls parent The TJX Cos. Inc., which is still heavily dependent on stores, that’s especially good news. 

“Our treasure-hunt shopping experience, eclectic mix of merchandise, and great brands and values continue to resonate with shoppers across our geographies,” said Ernie Herrman, chief executive officer and president. “While the environment remains uncertain, particularly internationally, we are convinced we are strongly positioned as we emerge from this health crisis.”

And offprice leader TJX said it’s not done building boxes. “We see a significant opportunity to grow our global store base at each of our divisions,” Herrman said. “In total, we believe we can open more than 1,600 additional stores to grow to about 6,275 stores in the long term just with our current banners and our current countries. Availability of real estate is terrific, and we see plenty of opportunities to open new stores or relocate existing stores.”

Techier Still

Fashion has spent the last year leaning into technology more than ever (and out necessity). The trend shows no sign of slowing down on either the consumer side of the business or the supply chain.

Steve Rendle, chairman, president and CEO of Vans and Supreme parent VF Corp., said: “We’ve been actively working to accelerate our hyper digital journey in fiscal ’21 with continued focus on a central consumer data platform that’s accessible to our brands and that enables them to understand consumers more deeply and to engage them in more meaningful and personal ways. And we leverage new technologies and processes to further digitize our go-to-market approach with advancements in 3D design and development, virtual product reviews and digital printing capabilities that shorten production calendars and accelerate our ability to flow newness and innovation.”

Not Over Yet

For the biggest of the big, operating with truly global scale, COVID-19 remains a real and present danger. 

Doug McMillon, president and CEO of Walmart, said: “The past several weeks have been more challenging in some countries. India, Canada, Chile and South Africa are priorities at the moment. Supporting our associates is our primary focus, but we’re also investing our resources to support the countries as we find opportunities to do so. In India, we’re donating oxygen concentrators, PPE and financial support.”

But through it all, Walmart has been able to press its advantages and expand. “We saw an acceleration of traffic in our stores, gained market share in grocery, improved in-stock levels and grew e-commerce sales globally by 43 percent in constant currency, excluding recent divestitures,” McMillon said in his update to Wall Street. “Global e-commerce penetration now represents over 12 percent of total company sales, an increase of 340 basis points over last year.”

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