People in their 20s and 30s likely remember the smell and feel of an Abercrombie ($ANF) store as much as its clothes— the pungent cologne wafting as far as the entrance, the black-and-white photos of shirtless heartthrobs, the darker-than-dim lighting. They can picture the classic Steve Madden ($SHOO) big-head ads mounted throughout shopping malls and Nordstrom’s ($JWN) displays of designer goods.
These three brands are longtime mall staples, but US malls have been in decline for years. The retail bubble burst as developers overbuilt shopping centers and tenants failed to make rent, while consumers were busy embracing e-commerce. The Coronavirus pandemic is accelerating the retail apocalypse — pushing major companies like J.C. Penney, Neiman Marcus, and J. Crew into bankruptcy — and putting shopping malls and the brands that still inhabit them in a precarious position.
Nordstrom, one of the top-ten mall tenants in America, already shared plans to close 19 stores. The upscale department store chain, Abercrombie & Fitch, and Steve Madden all have earnings calls today that may predict how they’ll weather the global crisis.
Abercrombie finds hope in digital sales
Abercrombie reported an adjusted loss of $3.29 per share on revenue of $485.4 million, while sales fell a distressing 34% during the first quarter. CEO Fran Horowitz said that about half of Abercrombie’s global store network has reopened in an effort to bounce back.
The preppy retailer had been struggling for a while after dominating teen fashion trends in the early-mid 2000s. And its waning influence feels closely linked to the fall of malls. In 2011, Abercrombie offered to pay Jersey Shore cast members to stop wearing its clothes on the show, still attempting to harness the brand’s bygone “aspirational” image.
Abercrombie's Twitter following has been steadily falling over the last five years. Since 2016, the company has lost 17% of its Twitter audience.
As Abercrombie went out of vogue and lost its luster, its price point ebbed and flowed on a downward trend, the average product price dropping from $59 in 2018 to $38 in 2020.
But there are a few ways Abercrombie might be able to turn things around. Horowitz said the company’s first-quarter digital sales were up 25% globally year over year. Facebook chatter around its Hollister brand spiked over the past few months. If Abercrombie focuses its efforts on e-commerce and Hollister’s branding, it might have a shot.
Steve Madden is staying strong, but not immune
Steve Madden beat on first-quarter sales forecasts, but still lost profit to the pandemic. The accessory and footwear company closed all of its locations outside of China in the wake of COVID-19 as retail revenues dropped 15.8%. Wholesale business fell 13% to $302.7 million, with a 15% decrease in wholesale footwear and a 5.4% dip in wholesale accessories and apparel. The company blames these losses on “significant” order cancellations in March.
Unlike Abercrombie, Steve Madden has been successful in separating itself from mall culture and staying relevant with a robust online presence. The brand has been gaining Facebook likes and mentions for years. Last month, Steve Madden hit a peak of 14,900 mentions, the most it's seen since 2018. Loyalists (and their shoe pics) could be a boon for Steve Madden, if it can turn likes into dollar signs.
Nordstrom's pre-pandemic success could cushion the COVID blow
Nordstrom will report earnings after market close, and some analysts are expecting a decline. The retailer closed all of its US and Canada locations following COVID-19 guidelines, and lost foot traffic means lost business. The Zacks Consensus Estimate predicts a first-quarter loss of $1.15, compared to the year-ago period when it reported earnings of 23 cents. The consensus mark for sales shows a decline of 34.6% from last year’s reported figure.
But shares of Nordstrom and several other brick-and-mortar retailers were high yesterday with news of potential measures from Congress and the White House to support the economy. And, according to our data, Nordstrom was doing pretty well before the pandemic. For example, the company’s count of items on sale has gone down 33% in just a year.
Meanwhile, its price point has been rising, from an average product price of $101 in 2019 up to $304 in 2020. That’s a 201% increase.
Nordstrom’s Facebook likes dropped from 2018 to 2019, but have since picked back up. Its mentions have followed suit.
Companies like Nordstrom are now forced to rethink how they conduct retail operations to better accommodate modern consumers and their changing lifestyles. With stores closed, the company no longer has a need for retail employees. Nordstrom listed 1,810 job openings in March. Following a round of layoffs this month, only ten job postings remain on the company's career website.
Soon-to-be-defunct retailers like J.C. Penney and Neiman Marcus were once linchpins of malls across the country, and their deaths will certainly hurry along with the demise of the US mall. But the demise of the US mall doesn’t have to be the coup de grâce for other wounded retailers. They’ll have to expect a slow and uncertain return to in-store sales and restructure accordingly. The industry was already evolving pre-pandemic, and this could be the push that some companies needed to outgrow an outdated retail model.
About the Data:
Thinknum tracks companies using the information they post online - jobs, social and web traffic, product sales, and app ratings - and creates data sets that measure factors like hiring, revenue, and foot traffic. Data sets may not be fully comprehensive (they only account for what is available on the web), but they can be used to gauge performance factors like staffing and sales.
