Specialty Apparel Stores - Great American 2015 — Retail Monitor 1 Specialty...

Specialty Apparel Stores - Great American 2015 — Retail Monitor 1 Specialty Apparel Stores Bankruptcies and store closures: The specialty retail sector has seen a number of
Specialty Apparel Stores - Great American 2015 — Retail Monitor 1 Specialty Apparel Stores Bankruptcies and store closures: The specialty retail sector has seen a number of
Specialty Apparel Stores - Great American 2015 — Retail Monitor 1 Specialty Apparel Stores Bankruptcies and store closures: The specialty retail sector has seen a number of
Specialty Apparel Stores - Great American 2015 — Retail Monitor 1 Specialty Apparel Stores Bankruptcies and store closures: The specialty retail sector has seen a number of
Specialty Apparel Stores - Great American 2015 — Retail Monitor 1 Specialty Apparel Stores Bankruptcies and store closures: The specialty retail sector has seen a number of
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  • 1 October 2015 Retail Monitor

    Specialty Apparel Stores

    Bankruptcies and store closures: The specialty retail sector has seen anumber of bankruptcies and liquidations over the past year, and further

    closures appear on the horizon. While some have gone out of business

    entirely, some specialty retailers have closed underperforming stores to right-

    size the business. Dots, Delias, Wet Seal, Body Central, Deb Shops,

    Abercrombie & Fitch, and Aeropostale are all retailers that have closed either

    all or part of their store bases over the past year. More recently, surf-and-

    skate inspired specialty apparel has faced challenges, as Quiksilver filed for

    bankruptcy in September 2015, and PacSun continues to experience

    comparable store sales declines. American Apparel filed for bankruptcy in

    October 2015, and Joes Jeans was recently sold to Sequential Brands.

    Declining mall traffic/e-commerce growth: The general decline in malltraffic continues to impact sales at specialty retailers. Specialty apparel

    retailers have worked to offset declines in brick-and-mortar locations by

    offering a wide assortment of products and sizes on their e-commerce

    websites, as well as incorporating social media tools and enhancing their

    omni-channel presence. In addition, retailers have worked to leverage store

    locations, such as by offering site-to-store shipping.

    Competition/promotional activity: Due to extremely high competition in themarketplace, specialty apparel retailers continue to be hyper-promotional to

    lure in customers who have been conditioned to expect constant and deep

    promotions. This has impacted profitability.

    Payroll issues: Many retailers, including a number of specialty apparelretailers, have been under pressure to increase minimum wage rates, which

    increases payroll expenses. For example, the Gap recently announced it

    would raise its minimum wage to $10 in 2015. In addition, there has been

    mounting pressure to stop the practice of on-call scheduling. While it allows

    retailers to avoid being over-staffed during slower times, it also results in

    unpredictable schedules and paychecks for employees. The Gap,

    Abercrombie & Fitch, Ann Taylor, Victorias Secret, and Bath & Body Works

    have all announced they will cease the practice.

    Going forward into the holiday season, retailers will continue to work to offset

    brick and mortar sales declines by offering a wide assortment of products on their

    e-commerce websites. Further consolidation within the sector is likely, as retailers

    will continue to right-size their store bases and close underperforming locations

    as leases expire. Some specialty retailers may be forced to shutter a more

    significant number of stores, if steep sales declines persist. Store base reductions

    can reduce operating expenses and improve companies bottom lines.

    The specialty retail sector continues to face challenges, particularly in the teen and womens sector. Retailers have been

    negatively impacted by the decline in mall traffic, in part due to increased e-commerce spending. In addition, fashion

    trends over the past several years moved away from major brands to fast-fashion retailers. In the absence of an it item

    to drive sales, many retailers have been experimenting with their merchandising mix to entice shoppers. While customers

    have responded favorably to some brands mixes, such as Old Navy and American Eagle, others have stumbled, with Gap,

    Zumiez, Aeropostale, J. Crew, and Christopher & Banks all citing merchandising missteps in the past six months. Other

    retailers, including Gap and Abercrombie & Fitch, have noted the need to adjust their merchandising strategy to compete

    with fast fashion retailers, and are working to bring in newer product more quickly. The major trend within the apparel

    sector has been consumers becoming more casual in appearance, particularly as the athleisure apparel trend has gained

    traction. Consumers are wearing stylish, comfort apparel that can be worn to work out or run errands.

    NOLVs: NOLVs have varied by the

    type of retailer and the performance

    of the company. In general, NOLVS

    for Teen and Childrens retailers have

    decreased due to lower margins and

    decreased sales, while NOLVs have

    increased for Womens and Mens

    retailers due to gross margin

    improvements. There are some

    outliers in all segments.

    Sales Trends: Most companies have

    experienced negative comparable

    store sales trends recently due to

    declines in customer traffic; however,

    others with appealing product mixes

    and strong e-commerce sales have

    fared better.

    Gross Margin and Discounting:

    Gross margin has been adversely

    impacted by promotional pricing to

    drive sales. However, margins have

    improved for some retailers in recent

    months as companies better manage

    their inventory levels and improve

    promotional strategies.

  • 2 October 2015 Retail Monitor

    Specialty Apparel Stores

    The following tables illustrate comparable store sales trends for major public specialty apparel retailers

    (Represents the most recent fiscal quarter reported):

    Family Specialty Apparel

    J. Crew (11.0%) (8.0%) (3.0%) 4.0%

    Banana Republic (4.0%) (8.0%) 2.0% (2.0%)

    Gap (6.0%) (10.0%) (6.0%) (5.0%)

    Old Navy 3.0% 3.0% 11.0% 0.0%

    Urban Outfitters 4.0% 4.0% 6.0% (1.0%)

    Womens Specialty Apparel

    White House/Black Market (1.9%) 1.7% 5.4% (1.4%)

    Chicos 0.9% (2.3%) 1.2% (1.6%)

    Christopher & Banks (12.4%) (11.7%) N/A (7.6%)

    Ascena Retail Group (4.0%) (3.0%) (2.0%) (4.0%)

    Guess (2.8%) (5.9%) (5.0%) (4.8%)

    New York & Co. 3.8% 1.8% (0.9%) (3.4%)

    Express 7.0% 7.0% (2.0%) (5.0%)

    Victorias Secret 3.0% 5.0% 4.0% 3.0%

    Mens Specialty Apparel

    Mens Wearhouse 3.1% 6.8% 6.8% 2.2%

    Jos A. Bank (9.4%) (1.5%) (6.6%) (8.1%)

    Teen Specialty Apparel

    Abercrombie & Fitch (4.0%) (9.0%) (10.0%) (10.0%)

    Aeropostale (8.0%) (11.0%) (9.0%) (11.0%)

    American Eagle 11.0% 7.0% 0.0% (5.0%)

    The Buckle 1.1% (0.3%) (0.5%) (0.9%)

    Zumiez (4.5%) 3.0% 8.3% 3.7%

    Childrens Specialty Apparel

    The Childrens Place (3.5%) 0.7% 3.7% 0.2%

    Gymboree 2.0% 0.0% 5.0% 1.0%

    Note(s): The most recent quarter reported for total Ascena Retail Group ended July 25, 2015; Urban Outfitters ended July 31, 2015; all other companies ended August

    1, 2015.

  • October 2015 Retail Monitor 3

    Monitor Information

    GAs Retail Monitor highlights key industry drivers within the retail sector and how they relate to

    GAs valuation process and current trends in recovery values. As the retail industry is impacted

    by consumer spending patterns and various macro and microeconomic factors, timely and

    accurate information is essential. GA strives to contextualize important indicators to provide a

    curated perspective of the market for our clients needs. Such indicators include general industry

    trends, comparable store sales trends, gross margin changes, and discounting activity. Any

    comparable store sales illustrated in this monitor reflect figures as they have been reported by

    public retailers. The methodology for calculating comparable store sales may vary by company.

    GA welcomes the opportunity to make our expertise available to you in every possible way.

    Should you need any further information or wish to discuss recovery ranges for a particular

    segment, please feel free to contact your GA Business Development Officer using the contact

    information shown in this and all Retail Monitor issues.

    GAs Retail Monitor provides a brief overview highlighting specific sectors of the retail

    industry. The information contained herein is based on a composite of GAs industry expertise,

    contact with industry personnel, liquidation and appraisal experience, and data compiled from

    a variety of well-respected sources believed to be reliable. GA does not make any

    representation or warranty, expressed or implied, as to the accuracy or completeness of the

    information contained in this issue. Neither GA nor any of its representatives shall be liable for

    use of any of the information in this issue or any errors therein or omissions therefrom.

  • October 2015 Retail Monitor 4

    Experience

    GA is one of the largest liquidators of retail inventory and has been involved in a

    variety of liquidations, ranging from the disposition of excess inventory and the

    closing of underperforming stores, to full-scale liquidations of national retailers with

    hundreds of stores. GA has experience with full and partial liquidations of companies

    throughout a variety of retail sectors, some of which are detailed below:

    Numerous retailers of apparel and accessories,

    including major department store retailers and a

    variety of specialty retailers that are found in

    malls throughout the country.

    Leading off-price retailers of apparel and

    accessories, including major national and

    regional chains.

    Several e-commerce and multi-channel retailers,

    as well as flash sale websites and auction

    websites. In particular, GA has appraised 71 of

    the top 500 e-commerce companies as reported