Recently, GAP’s APM store in Wangfujing, Beijing (600859, Stock Bar) announced that it will close the store and begin liquidation. On May 17, a reporter from China Business Daily visited the store and found that most of the products were on sale at a 40% discount, and the remaining products were also marked with red discount price tags. However, not all fast fashion brands are streamlining their operations. After experiencing a trough period in which performance growth slowed down and stock prices plummeted, ZARA began to transform. Facing the industry trend of survival of the fittest, how should fast fashion brands proceed in the future?
Gap Beijing Wangfujing APM store closing announcement
01 GAP closed its store and ZARA opened its store
Because it was Sunday, Gap’s Beijing Wangfujing APM store was crowded , many consumers came to “buy the bargain” and even had to queue up to check out in the store. However, some consumers believe that even with a 40% discount, some styles are not cost-effective. For example, a basic cotton T-shirt, with an original price of close to 200 yuan, still costs about 80 yuan with a 40% discount, while a T-shirt of the same texture is priced at around 80 yuan. The selling price on e-commerce platforms is generally less than 50 yuan. “This time I bought the popular items first. The discounts may be even greater at the end of the month, and then I can buy other items.” A customer who was checking out told a reporter from China Business Daily.
Many customers in Gap’s Wangfujing APM store in Beijing come to “buy the dip”
Why? The store was closed, the clerk explained to reporters because “the contract had expired.” The clerk also said that the clearance sale will last until June 7, and it is still uncertain whether the specific discount will be adjusted.
However, the reporter discovered that opposite the Wangfujing Gaipu store that was closed this time, a new ZARA store was being renovated.
The ZARA store to be opened on Wangfujing Street in Beijing
From the outside, this store is relatively large It is large and adjacent to large department stores such as Wangfu Central and Wangfujing APM. It can be called the “prime location” in the city center. The location here shows that ZARA attaches great importance to the store. Previously, ZARA closed four stores in the Wuhan market. This behavior makes people wonder whether ZARA is accelerating its withdrawal from the Chinese market. However, this speculation seems to be unfounded because, while closing stores, ZARA is also constantly opening stores.
It is worth mentioning that ZARA has experienced a trough period when its performance growth slowed down and its stock price plummeted. After that, it began to transform. On the one hand, ZARA has begun to focus on online channels. Last year, the group added more than 100 online channels. In the Chinese market, ZARA opened a Tmall flagship store and launched services such as “online ordering and offline pickup” On the other hand, ZARA has also begun to expand its business lines, releasing its first lipstick series ZARA Ultimatte to test the beauty market. In addition, it has also accelerated the development of ZARA home home line.
The good news is that these measures have achieved obvious results. According to the 2019 financial report released by Inditex Group, from February 1 last year to January 31 this year, the group’s net sales were 28.3 billion euros, a year-on-year increase of 8%, refreshing history, and net profit was 3.6 billion euros, a year-on-year increase of 6% .
02 Fast fashion welcomes the trend of store closures
The closure of stores may not only Just because the contract is up. In February this year, Gap announced that it would close 230 Gap stores in the next two years, of which 130 stores will be closed this year. It is reported that most of the closed stores are located in North America, and most of the closed stores are stores with poor location or poor performance.
On April 23, Gap announced that due to the impact of the new coronavirus epidemic, the company will take a series of measures to ensure cash flow, including closing stores, cleaning up inventory, and postponing dividends. pay, furlough most store workers in the U.S. and Canada until stores reopen, and more. Data shows that US$1 billion quickly evaporated from Gap’s books, and now only less than US$1 billion remains. Gap’s operating difficulties can be seen from its stock price. Since the beginning of the year, its stock price has dropped from around US$15 per share to around US$7, almost halved.
In fact, not only Gap, but also fast fashion brands such as H&M and Uniqlo have experienced sharp declines in revenue due to the epidemic, and have had to adopt methods such as closing stores and clearing out goods to maintain their business. Corporate cash flow.
It is understood that from March 1 to May 6, H&M’s total sales fell by 57% year-on-year, of which sales in China fell by 32%. About 60% of H&M’s 5,061 stores are closed. Like Gap, H&M also prioritizes ensuring the company’s cash flow. It said that in order to cope with the impact of the epidemic, the company will gradually close stores with unsatisfactory operating performance.
Uniqlo’s recently released financial report shows that due to the epidemic, Uniqlo’s sales in China fell by about 40% in March this year, and by about 50% in Europe and the United States. It is reported that it has temporarily closed 50 stores in the United States and a total of 98 stores in ten European countries.
Some analysts believe that the current epidemic has had a huge impact on the international fast fashion industry, with store customer flow reduced and corporate orders delayed.The price has fallen by more than 60%, and the market value has evaporated by 28 billion
As of April 25, Gap’s stock price has fallen 61.65% since February to US$6.9 per share. The market value has evaporated by approximately US$4 billion (approximately RMB 28 billion).
On March 12, local time, Gap Group released its fourth quarter financial report and full-year performance report for 2019. According to this financial report, Gap Group recorded a net loss of US$184 million in the fourth quarter of 2019, compared with a net profit of US$276 million in the same quarter of 2018. Rating downgraded to “junk”
Misfortune never comes singly. Gap’s credit rating was downgraded by S&P Global Ratings on Thursday and is now negative, citing uncertainty over when stores will reopen during the pandemic. Uncertainty about “permanent” sales losses. The rating was downgraded from BB to BB-, three notches of speculative or “junk” grade.
The official website offers crazy discounts up to 25% off
The official website of GAP shows that all products are currently on sale in order to survive.
It has been established for more than 50 years and has a total of more than 3,500 stores
Gap, founded in 1969, is the headquarters San Francisco, California, is a deep memory in the hearts of post-war baby boomers in the United States and has a profound influence in the United States. Now it is an old brand with more than 50 years of history.
Gap’s latest data has approximately 150,000 employees and a total of 3,688 stores distributed around the world, such as the United States, Canada, Mexico, France, Ireland, Japan, Indonesia, South Korea, Taiwan, Hong Kong, Malaysia, Singapore, the United Kingdom and mainland China, etc.
The epidemic has caused 26.5 million people in the United States to lose their jobs
Many retailers are facing bankruptcy
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Gap’s business warning occurred on the same day as the U.S. Department of Labor said that another 4.4 million Americans filed for unemployment last week, bringing the total number of first-time jobless claims nationwide since March 14 to 26.5 million.
On Thursday, April 23, local time, the latest data released by the U.S. Department of Labor showed that the number of initial jobless claims in the United States for the week ending April 18 was 4.427 million, slightly higher than the number surveyed by Dow Jones. Economists expected 4.3 million.
The previous week’s data was revised downward to 5.24 million people. Compared with the data for the week ending April 18, there was a decrease of more than 800,000 people, which was the third consecutive week of decline.
But even so, the cumulative number of initial jobless claims in the past five weeks still reached a record high of 26.45 million. This number exceeds the 22.442 million jobs added since the U.S. economy recovered from the financial crisis in November 2009.
Meanwhile, more than 95% of Americans are currently under quarantine and retailers across the country have been forced to close their doors to curb the spread of the virus. As a result, brick-and-mortar retail chains are facing unprecedented sales declines, forcing them to cut costs and tap credit lines to stay afloat.
Luxury retailer Neiman Marcus is preparing to seek bankruptcy protection this week, Reuters reports, while other department store operators are trying to avoid the same fate.
Like many U.S. companies, Gap has withdrawn its full-year targets, suspended its dividend, laid off employees and cut existing credit lines.
True Religion, a high-end American denim brand, filed for bankruptcy protection for the second time in less than three years, becoming another example of the impact of the epidemic on the retail industry.
True Religion listed assets and liabilities of $100 million to $500 million in an April 13 court filing, saying that “while the company hopes to survive this difficult period, funds are already burdened.” I can’t afford it”. CEO Michael Buckley said True Religion’s largest creditor is providing the company with new funding so it can restructure. He said: “In the near future, we will continue to operate our e-commerce business as we did before filing for bankruptcy protection until the stores open.”
Major U.S. retailers Macy’s and Kohl’s Kohl’s and Gap have furloughed tens of thousands of employees as they cut costs to secure cash reserves. </p
