A week ago, retail veteran Adrienne Lazarus visited Aritzia in The Westchester mall in White Plains, N.Y., and was bowled over by what she saw.
“Aritzia is killing it,” said Lazarus, who has been president or chief executive officer at Madewell, Intermix Ann Taylor, Frye and Bandier. “It’s all elevated, tailored, refined clothes for work and going out — beautiful coats, luxe sweaters, cashmere cardigans, beautiful blouses, skirts and trousers. It’s so put together. And upstairs I saw the best casualwear and puffers, for work and the weekend.”
This year, Aritzia is leading a pack of fashion specialty retailers with outstanding financial results including Ralph Lauren, Aerie, Urban Outfitters, Gap brand, Coach, Toteme and Fast Retailing. They’re all generating double-digit sales gains, which is rare in retail and particularly noteworthy now considering the widespread macroeconomic uncertainty and the consumer strain caused by rising food, gas, housing and health costs.
“Three things are driving this phenomena,” said William Susman, head of the consumer and retail practices at Cascadia Capital. “First, never underestimate the American consumer’s desire for more stuff. Second, these brands in particular are finding the right balance between offering high-quality and perceived relative value. The consumer is not stupid. She wants what she wants and wants to pay a fair price. Third, retail is detail. The leaders of these organizations are executing really well with basic blocking and tackling.”
Craig Johnson, president of the Customer Growth Partners research and consulting firm, said: “Consumer spending is solid, not great. But if you look at the specialty apparel market, it tends to be the upper-market players that are performing. It’s those [retailers] that focus on value and newness and an almost ‘casual elegance.’ They’re finding the white space, where there’s organic demand in the market.
“Much of retail is going sideways, but these specialty brands are doing quite well and providing newness,” Johnson said. “It’s all in the product and it’s about attracting higher-income individuals, not necessarily the top decile and executing with front-end excellence. You want to have geographic expansion and an expanding brand concept.”
Jennifer Foyle, president and executive creative director of Aerie and American Eagle, said: “I love building our own brands within our portfolio. It’s hard. It’s very different. Not everyone approaches business that way,” speaking at the Wharton Baker Retailing Center CEO Summit in Manhattan this month. “You see a lot of collaborations out there. I’m more in the business of trying to create [more of] our own business within a wonderful portfolio of brands. I think we’ve only just started. Sometimes you stand out by doing what your competition is not doing. That’s how Aerie has won and that’s how we are relevant today.
“I’m constantly focused on where is that next white space,” she said.
Last quarter, Aerie’s sales rose 25 percent. Ditto for Coach. Ralph Lauren rose 17 percent. Urban Outfitters gained 13.7 percent. Gap brand was up 10 percent.
Real standout performances came from Aritzia, up a whopping 44.1 percent in its second quarter and the Fast Retailing-owned Uniqlo, which was up by 34.6 percent in North America during its latest fiscal year, ended Aug. 31. (Overall, Fast Retailing saw a 16.6 percent annual gain).
Executives from many of these retailers have indicated that the sales momentum seen in the second quarter has continued into the third quarter, and should extend into fourth-quarter holiday selling.
Still, for many other specialty fashion brands, gains have been elusive. Lululemon, J.Crew, Nike, Athleta and Old Navy have been underperforming lately. And in the down-and-out category, Allbirds closed all of its stores and Francesca’s liquidated.
“The brands winning are those being the truest version of themselves,” said Lazarus. “People want Polo to be Polo. Levi’s to be Levi’s. It’s all about understanding what your brand means to their customers, why it exists and really amplifying the brand DNA. Gap is being Gap again, but they’re ensuring that the brand evolves. Aritzia really knows the customer and stays close to the customer.”
At Aritzia in The Westchester Mall, the brand’s multigenerational appeal was obvious. “The store was packed with every age,” said Lazarus.
Foyle stressed the same notion.
“We go back to our core to make sure we’re always thinking about that and wardrobing her” that way, she said. “Trends are happening so fast. We just have to be getting in front of it and seeing where we think that customer is going next. But stay with your product.”
Lazarus sees “luxury trade down” as a common thread through specialty retail. It could be tagged as “quiet luxury,” or in the case of Aritzia, “everyday luxury” is the mantra. Coach has long been associated with “accessible luxury,” but doesn’t want to be boxed into such a characterization. Similarly, Toteme, the Swedish fashion specialty brand, is positioned between contemporary and accessible designer fashion.
“They’re all investing in making better-quality garments, because customers want higher quality and lasting items,” Lazarus said. “Zara management has said it’s not about the race to the bottom. It’s about building a better item. The customer will pay for something better.” (Zara reported a 9 percent second-quarter sales gain.)
“The categories killing it are back-to-office — blazers, tailoring, suiting, cardigans, little heels,” Lazarus said. “Higher-unit retail is doing better than casual.”
The best-performing specialty brands, she said, are stealing market share. “Total market is growing at low single digits, at best.”
According to Susman, “The Ralph Lauren team continues to do a masterful job creating a global multiple lifestyle appeal all within the Ralph Lauren world,” whether it’s someone wanting to buy a cup of Ralph’s Coffee, dining at the Polo Bar or shopping the core Polo Ralph Lauren collection. “They’re making their money on the bread and butter label, not Purple Label,” the highest priced, most luxurious tier of the brand.
“But everything the team there does conveys a desirable lifestyle and how people want to live,” Susman said.
Regarding the Gap brand, he said: “There is reason to go back to it. The merchandise, the marketing, and the presentation in-store and online is what we remember the Gap for, and why we love it again.”
Johnson said within the Urban Outfitters portfolio, it’s the Free People, Anthropologie and Nuuly businesses driving the double-digit growth, while the namesake Urban Outfitters brand is showing improvement in the wake of turnaround efforts. He described Aritzia’s expansion as “thoughtful” and focused on the U.S.
But for any successful specialty brand, Johnson said: “It isn’t just about adding more square footage. It’s about also bringing real newness in.”
