Retail

Retail Reconsidered: More Brands Turn Critical Eye Toward Offline Locations

Ulta Beauty

The harsh realities of the pandemic’s effect on retail continued to show themselves late this week as more high-profile brands reported plunging quarterly earnings and looked at more store closings.

After Zara parent company Inditex earlier this week revealed what could be a template for a new online-offline model, Ulta Beauty seems to be considering the same strategy. Several reports say the company is now reviewing the viability of all 1,254 of its brick-and-mortar locations. Chief Financial Officer Scott Settersten told media outlets, “If you did this with a white, clean piece of paper, how would you reorganize your store fleet?”

“Ulta is reviewing a variety of factors in deciding which stores to keep open and which to close,” says The Motley Fool . “These factors include profitability, rent, traffic, and location. Some stores may undergo relocation to more favorable retail space in malls and other shopping areas, pouncing on desirable floor space left open by shops shut down permanently during the coronavirus retail disaster.”

The move received some encouragement from analysts. A research note from Morningstar’s David Swartz said, “We think it has developed a following that has allowed it to take share from mall-based stores while competing effectively against wide-moat Amazon and other e-commerce.” Offline sales remain central to Ulta’s strategy because “teen girls and women like to sample products in Ulta’s stores” so “its salons, selection, promotions, and service encourage frequent visitation.”

Ulta has reopened more than 900 of its stores for curbside pickup, and over 650 locations have opened for in-store sales. The cosmetics chain expects to open between 30 and 40 new stores this year, about half as many as initially planned for 2020, according to Settersten.

On a smaller scale, fashion supplier and retailer Guess announced it will close about 100 stores in North America and China over the next year. About 677 of the company’s 1,141 directly operated stores have reopened, including all stores in Asia, more than 400 stores in Europe and 180 stores in North America. CEO Carlos Alberini said current quarter-to-date sales at reopened stores are about 75 percent in North America and 70 percent in Europe, compared with the same time last year.

“The COVID-19 Crisis has had a material impact on our Company, including our operations and our financial results,” Alberini said in a statement. “I couldn’t be more proud of our teams around the world as they acted decisively, quickly and strongly to control what could be controlled and demonstrated a level of commitment, leadership and empathy that is unparalleled. Our top priority has been the safety and well-being of our associates, customers and the communities we serve. To minimize our loss and protect our liquidity, we challenged every aspect of our business which was being significantly impacted by extensive store closures and lower customer demand. In addition to postponing our decision related to the payment of the quarterly dividend, we were able to reduce expenses, adjust inventory levels and purchases, lower capital expenditures and extend vendor payment terms to react to the Crisis.”

Guess, like other fashion retailers, had a huge plunge in revenues for the quarter. Total net revenue for the first quarter of fiscal 2021 decreased 51.5 percent to $260.3 million, compared to $536.7 million in Q1 2019.

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