Consumers are scared to go out and retailers are floundering. Is there a future for the traditional indoor shopping mall?
Dressing up is being dressed down – and that’s bad news for retailers that specialize in traditional office clothes.
After years of business attire becoming increasingly casual, the sudden transition to working from home for millions of Americans has undermined retailers that sell dress clothes.
Men’s Wearhouse, Jos. A. Bank, Brooks Brothers, Lord & Taylor, Ann Taylor, Loft and Neiman Marcus are among the retailers whose parent companies have entered Chapter 11 bankruptcy in recent weeks, having experienced a sudden drop-off in sales due in part to what industry leaders are calling “casualization.”
While most nonessential retailers have posted sales declines due to temporary store shutdowns and a sharp drop in foot traffic during the COVID-19 pandemic, companies that specialize in dress clothes are in the worst shape – especially menswear shops.
Tailored Brands bankruptcy: Men’s Wearhouse, Jos. A. Bank owner files for Chapter 11 protection
Brooks Brothers store closings planned: Retailer files for Chapter 11 bankruptcy protection
Take Men’s Wearhouse. In 2011, 1 in 5 suits sold in America were purchased at one of the company’s more than 1,200 stores, according to a court filing.
Less than a decade later, demand for suits has collapsed. Tailored Brands, which owns Men’s Wearhouse and Jos. A. Bank, filed for Chapter 11 protection this month. The retailer plans to close up to 500 locations.
Revenue for men’s clothing stores is expected to decline by 13% in 2020, according to research firm IBISWorld, and continue falling for several years.
“People are shopping more online, and men are just not buying suits,” said Helena Song, an S&P credit analyst who tracks retailers, including menswear companies.
Jamie Johnston is among them. Johnston, a Toronto real estate agent, remembers a time not too long ago when the area surrounding his downtown office was swarming with people in suits. Those days now feel like a distant memory.
Now, he says, the agents he works with are dressing much more casually even when they make their way to the office for socially distanced work. Most of their client meetings are happening over video conference services like Zoom, which invites more casual attire.
“I used to always wear a jacket to the office, and now I don’t,” he said. “Nobody’s wearing jackets.”
A trend long in the making
The pandemic has simply accelerated an ongoing pivot toward more casual wear in business, said Ray Wimer, an assistant professor of retail practice at Syracuse University’s Whitman School of Management.
“Instead of having casual Fridays, it’s become the casual workweek,” he said.
Some retailers, such as women’s apparel chain Chico’s, say they’ve benefited from earlier shifts toward more casual wear. The company says its White House brand is leading the way.
“You really can’t define what workwear is anymore,” Chico’s CEO Molly Langenstein said in a June 10 conference call.
But some retailers say the decline in celebratory events is hurting them more than the pivot toward casual wear in the work-from-home environment.
It’s stemming from a “general lack of events and occasions from weddings (to) summer parties to company events as well as business trips,” said Yves Müller, chief financial officer of luxury fashion brand Hugo Boss, on a conference call Aug. 4.
Many black-tie events have been dramatically scaled back, postponed or canceled altogether due to social distancing requirements. That’s been devastating for companies like Men’s Wearhouse and Jos. A. Bank, both of which had reliable tuxedo rental businesses until a few months ago.
Tailored Brands declined to comment for this story.
“Think of all the junior high or senior high proms that got canceled,” Wimer said. “A good portion of their business dried up. For the foreseeable future, maybe you can have a wedding, but I don’t see schools having proms or other formal events where you get a good portion of your revenue from.”
Tailoring a new business strategy
What’s unclear is whether retailers that specialized in dress clothes have enough time to adjust their strategies and avoid going out of business altogether.
Brooks Brothers has done it before. The company has long claimed credit for inventing the button-down polo shirt around 1900.
The company is expected to close at least 50 stores – and possibly more. Brooks Brothers recently announced it had arranged tentative deal to sell itself for $305 million to SPARC Group, a conglomerate including mall owner Simon Property Group and Authentic Brands, which used a similar strategy to rescue fashion chain Aeropostale. SPARC has said it plans to acquire at least 125 of Brooks Brothers’ 424 stores globally.
Brooks Brothers declined an interview request but said in a statement that “our goal continues to be finding the right buyer and continuing our legacy as an institution of American fashion.”
Men’s Wearhouse has also made smart strategy changes in the past.
Founded in 1973 by George Zimmer in a Houston shopping strip, Men’s Wearhouse grew into a retail powerhouse with 500 stores open by 2000 and more than 1,200 by 2011. Zimmer famously promoted the company in commercials with the tagline, “I guarantee it.”
“A key to the Company’s rapid growth and success throughout its nearly 50-year history is its ability to adapt to changing customer preferences,” Tailored Brands chief restructuring officer Holly Etlin said in a court filing.
That included a “move towards more casual business dress” in the 1990s, during which Men’s Wearhouse replaced about 60 suits with sport coats.
But the company fell on hard times after adding too much debt in a deal to acquire Jos. A. Bank in 2014. Tailored Brands sales fell 5.6% in the two years before the pandemic erupted, according to a court filing.
Will Americans go back to dressing up?
The obvious question that’s looming for retailers is when buying habits will revert to pre-pandemic ways. Or, ominously, will the shift toward more casualwear be permanent?
Several executives have said in recent conference calls with analysts that they believe Americans will want to dress up again at some point.
“We expect a clear and strong rebound once social life starts to normalize,” Hugo Boss’ Müller said.
But analysts say that expectation may be off base.
“It sounds like a little bit of wishful thinking that as soon as the pandemic is over, people will go out to buy three suits or five suits,” S&P’s Song said.
Even if they do, many are likely to do so online, where many companies that have bet big on brick-and-mortar locations are not well-positioned.
“The pandemic really accelerated” the trend toward online purchasing, Song said. “Our expectation is we’ll continue to see that accelerating shift in customer behavior.”
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.
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