Despite its many challenges of late, apparel retail is also experiencing a nice tailwind currently thanks to the healthy economy. For this episode we are joined by John Kernan, managing director for retail and consumer brands for Cowen and Company, to talk about the winning strategy of off-price retailers, the challenged posed by emerging direct-to-consumer brands and the continued success of athleisure.
Plus, Kernan provides insights into the direction the sector is headed as both brands and retailers attempt to shake off old processes and technologies in favor of new practices and innovations.
Click here to listen to the full episode.
Below are some excerpts from the conversation:
Kernan on the current state of retail following last year’s so-called retail apocalypse:
“Right now we are seeing the best growth in brick-and-mortar retail that we have seen in almost a decade in terms of year-over-year topline growth. The numbers that you’re seeing out of big-box retailers, whether it’s Walmart, Target, TJX, Ross Stores, Burlington, and then on the specialty side, like a Lululemon, we haven’t seen growth like this in a long time. We’re in a very strong consumer environment. Some of that’s cyclical and ultimately that will slow, but I think what you’ve seen is a big change in fundamentals across retail that have really changed the narrative.”
Kernan on off-price retailers’ winning strategy of focusing on value and assortment while the rest of the retail world is fixated on bells and whistles:
“The store economics of rapidly flowing inventory that get consumers in on a treasure hunt experience that’s all focused on value is just going to be a market share gainer. They don’t need experience. Their experience is shopping. Shopping is heroin for people. It’s addictive. They can’t stop doing it. Human beings are conditioned to spend and shop, particularly Americans in a capitalist system. Our economy is built on consumption.
“The off-price retail machine is really just built on fast-moving goods, great value that you’re not going to get in a department store channel, good brands for the most part. The store economics that these businesses generate are off the charts. They generate returns on capital that are just so far in excess of retail peers.”