The Limited's Last Act Is Good News for Competition
Last week, women's clothing retailer The Limited announced it was closing down all of its stores. It's yet another casualty in the war on shopping malls and highlights the further transition of clothing retail to "fast fashion" and online formatting. It has been an ominous year for brick-and-mortar stores, but another one down could be good news for the survivors.
Image source: The Limited.
Traditional retail casualties
L Brands (NYSE: LB), owner of brands likeVictoria's Secret and Bath & Body Works, spun off its last stake in The Limited to private equity company Sun Capital in 2010. Once a thriving fixture of the shopping mall experience, the beleaguered company is throwing in the towel and is now in process of closing down its remaining 250 locations.
Sun Capital said it will be taking a loss on the remaining equity has in the business, but said in a statement to shareholders it still made money on the purchase through dividend distributions taken since the first stake was taken in 2007.
The Limited isn't the only traditional retailer to suffer losses. In the last year, there have been several high-profile closures and bankruptcies. Take a moment to remember the brick-and-mortar retailers we lost in 2016. Here's a select list:
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Sports Authority |
What was once the largest sports retailer in the nation filed for bankruptcy last spring. All locations were closed with a handful being purchased by rival Dick's Sporting Goods. |
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Aeropostale |
Also declaring bankruptcy last spring, the original fear was all 720 locations would be closed. The company was saved and 400 locations are now expected to stay open. |
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Chico's |
Chico's, White House Black Market, and Soma had a rough 2015 with 69 total closures. 2016 continued with another 21 stores shuttering at last report. |
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Ralph Lauren |
Last summer, the luxury retailer announced the closing of 50 stores. That represents a little over 10% of total locations at the time of the announcement. |
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Macy's |
Department store woes continued, and Macy's is leading the charge in shutting down underperforming locations. Last summer, the company announced 100 more stores would close. |
A flicker of hope for survivors
Retail has been under attack from online competition as a new generation of shoppers opt for convenience. Fast-fashion retailers like H&M and Urban Outfitters, companies that quickly and cheaply imitate current runway fashion trends, have also hurt old shopping mall mainstays.
However, the ongoing closures could help remaining shopping mall businesses like The Gap (NYSE: GPS)and American Eagle Outfitters (NYSE: AEO). Neither company has been immune to the changing times and both have closed down stores of their own. However, some of these clothiers -- American Eagle, in particular -- have managed to hang on to old clientele and expand into new markets.
Choices for clothing shoppers are slimming down, and while the way consumers go about equipping their wardrobes may be evolving, the need for clothing obviously isn't going anywhere. Having one less fixture in the mall to compete against could go a long way to help the efforts of the businesses that remain.
Image source: The Limited.
Consider what the trend means
Some traditional format stores like The Limited haven't been able to hang, but by and large the wave of store closings have been from still-viable merchandisers right-sizing operations for the new digital age. Rather than disappearing altogether, the industry is in a period of transition. As of late, convenient shopping at a discount has been the trend. Companies that can adapt and get new styles to market quickly and offer a robust online experience will be just fine.
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