A look back at Sourcing Journal’s most-read stories of 2020 paints a less-than-rosy picture of the year the fashion sector is leaving behind.
The past 12 months have been shaped by the global spread of the coronavirus, which has bankrupted retailers and left supply chains in shambles. Retailers and their partners struggled to stay afloat throughout the spring’s disruptions, which saw order cancelations that pushed those relationships to a breaking point. And as a second wave of infections pummeled the industry this fall and winter, some legacy brands have gone under for good.
1. Here’s the Inventory Issue Nordstrom Didn’t Expect to Have
Nordstrom’s Anniversary Sale is the promotional event of the summer season for many avid shoppers. But after the retailer whittled down its inventory this spring in anticipation of constrained consumer spending, it found itself lacking stock to put on sale. Many suppliers shut their doors as Covid ravaged their workforces, and finding sale-worthy products to bring in for the event—which was pushed from July to August—proved challenging, especially amid changing consumer appetites for more casual garb.
2. Update: Bankrupt JCP Rejects 144 Store Leases
Embattled legacy department store J.C. Penney has been a leading player in the 2020 drama. In October, the company rejected 144 store leases in a bid to pull itself out of Chapter 11 proceedings and make itself more attractive to potential buyers. Fast forward to December, and the store chain has exited bankruptcy through a sale of its operating business to its two largest landlords: Simon Property Group and Brookfield Asset Management. By mid-month, J.C. Penney had added 15 new closures to the 160 locations already axed throughout 2020. The company revealed that that number could climb to 200 as it continues to execute its “store optimization strategy,” a spokesperson said. It is now also on the search for a new CEO.
3. Sears Owner Faces $40 Million Lawsuit from Bangladeshi Suppliers: Report
In early June, Transformco—the privately-held parent company of Sears Holdings—was threatened with legal action after refusing to pay more than $40 million in outstanding debt to its garment suppliers in Bangladesh. Lawyers for 19 factory owners demanded immediate payment for the products and labor, alleging that the company “willingly misrepresented” its finances, convincing suppliers to extend it credit under false pretenses. Some suppliers said the company canceled orders after they had already been shipped to U.S. ports.
Many U.S. brands and retailers—like J. C. Penney, Ross, Kohl’s, The Children’s Place, T.J. Maxx, Urban Outfitters Inc. and Walmart-owned Asda—engaged in similar behavior, canceling both complete and in-production orders, refusing to pay, or demanding steep discounts from their suppliers in developing countries like Bangladesh, Ethiopia and India. By the end of October, Sears had still not paid back its suppliers.
4. UPS Temporarily Halts Pickup From Gap, Nike, Macy’s as E-Comm Spikes
The holidays are typically characterized as The Most Wonderful Time of the Year, but in 2020, there were bound to be hiccups. As e-commerce sales spiked amid Black Friday-Cyber Monday sales, parcel delivery services were overwhelmed with orders—especially from apparel brands. In early December, UPS instructed its drivers to halt pickups from six major retailers: Gap Inc., Nike Inc., L.L. Bean Inc., Hot Topic Inc., Macy’s Inc. and electronics retailer Newegg Inc. in a bid “to steer volume to capacity and ensure the UPS network is reliable for all customers,” the company told Sourcing Journal.
FedEx told Sourcing Journal around the same time that it projected peak shipping volumes would increase by 22 percent from 2019’s holiday season, prompting the shipper to add more than 70,000 workers.
5. Stein Mart Warns It Could Go Out of Business
Rumblings of an impending bankruptcy began mid-summer for Jacksonville, Fla.-based Stein Mart Inc. The company had attempted to head off its liquidity problems by selling itself to Stratosphere Holdco in January, but those negotiations fell through just a few short months later as the Covid crisis consumed retail.
The off-price retailer filed a Chapter 11 petition in August, revealing plans to liquidate its assets and close its 281 stores. But by December, a majority-owned subsidiary of Miami-based Retail Ecommerce Ventures (REV), which relaunched both Dressbarn and Pier 1 with asset-light strategies, agreed to resuscitate Stein Mart through a $6.02 million payment to acquire the retailer’s nameplate, private labels, domain names, social media assets and customer data from Hilco Streambank.
A similar narrative is now playing out with women’s bargain boutique chain Francesca’s, which announced plans in December to shutter more than 200 stores after filing for Chapter 11 earlier in the month.
6. Pakistan Lockdown Idles Factories—Where Orders Had Shriveled Up
March feels like a lifetime ago, but for anyone who needs a refresher: it was the month that global supply chains ground to a halt, with countries like India and Bangladesh implementing country-wide lockdown orders. Pakistan followed suit as the coronavirus began to spread, totaling more than 1,000 cases by the end of the month—a number that ballooned to 200,000 by July. Brands began to cancel orders in the spring, and by May, thousands of garment workers took to the streets to demand unpaid wages ahead of Eid-al Fitr, Islam’s largest holiday.
7. Gap Inc. Halts Summer and Fall Orders as COVID-19 Threatens Business
Gap Inc.—which operates Gap, Old Navy, Banana Republic and Athleta—asked its suppliers in April to hold off on shipping its already completed summer orders, and to cease production for fall. The fashion firm temporarily closed all of its company-operated stores in North America and Europe, furloughed the majority of its store staff, reduced its corporate headcount, and implemented pay cuts for its leadership team and board of directors in the weeks leading up to the order cancellations.
Like other brands that pulled the rug out from under their suppliers—from H&M Group to Inditex, Marks & Spencer, PVH Corp. and Arcadia Group—Gap faced backlash for the decision, prompting it to engage in talks with its partners about providing compensation under new terms in July.
8. Government Shuts Dov Charney’s Los Angeles Apparel Factories After 4 Worker Deaths
Overseas manufacturers weren’t the only ones hit hard by the spread of the coronavirus. Former American Apparel founder Dov Charney’s L.A. Apparel factories became flooded with cases during the summer months, prompting the L.A. County Department of Public Health (DPH) to shut down the operations after discovering “flagrant violations of mandatory public health infection control orders” in June. Despite seeing more than 300 confirmed infections by July and four worker deaths, Charney told Sourcing Journal, “We have done everything we could to prevent any outbreak of Covid-19 in our factory.”
“People are dying every day—there’s a death toll that’s devastating to everyone,” he said, adding that he believed workers were engaging in unsafe behavior outside of work hours. “We can’t control what people do outside of the factory, it’s a free society.”
9. Adidas Contributes to Marathon Footwear Arms Race With Adizero Update
Adidas updated its two-decade old Adizero silhouette—favored by runners for its ability to boost performance—with a fresh shape. The Adizero Pro, which debuted in May, incorporated the brand’s proprietary Lightstrike TPU, known as one of the lightest foams on the market, into the midsole, increasing energy return and stability. An embedded carbon “Carbitex” plate provides “an economically guided stride,” the brand said, while Adidas Boost foam at the heel provides a “plush element of comfort.” With the Adizero Pro, Adidas also debuted its thinnest mesh upper to-date, dubbed Celermesh, which provides a stabilizing fit while offering maximum breathability.
10. This Is Why Chico’s Believes Shoppers Will Return to its Stores
After closing its doors this spring amid mandatory brick-and-mortar shutdown orders, Chico’s began reopening stores in early May, citing advantages like small square footage and easily accessible locations that made it easier to open and operate. While Chico’s has suffered flagging sales in recent years, it doubled down on efforts to modernize its digital experience, offer flexible payments, and give shoppers access to same-day delivery services in order to drive sales this fall.
11. The Children’s Place Eyes 300 Store Closures
Brick-and-mortar-heavy retailers suffered disproportionately this year, as shoppers were increasingly confined to their homes. In June, the Children’s Place joined the list of chains to reduce its footprint, announcing plans to close 300 of its more than 900 stores by the end of fiscal 2021. The company said it would focus instead on building up its capacity for digital commerce, with the goal of reducing physical stores to less than 25 percent of its overall revenue by fiscal 2022.
By mid-November, those plans were already well underway, with the children’s specialty retailer seeing digital sales penetration increase to 44 percent in the third quarter, representing 55 percent of total sales year-to-date. While back-to-school sales took a hit this year, holiday shoppers demonstrated a robust appetite, returning the company to profitability.
12. Trump Set to Announce 90-Day Tariff Deferral for Certain Apparel Items
Citing the supply chain chaos caused by the worldwide spread of the coronavirus in March, nearly 400 CEOs from major global companies implored President Trump in March to delay the collection of duties on imports from other nations for three months or more. While Trump reportedly considered taking action in March, the announcement of tariff deferrals appeared to fizzle out until April, when the administration agreed to excluding certain imports—mostly from partners with Most Favored Nation (MFN) status. The action excluded China, which had been subjected to punitive increases in duties over the preceding 18 months which largely impacted apparel and footwear.
13. Macy’s and J.C. Penney Are Among Retailers Delaying Vendor Payments—Jeopardizing Upstream Fashion Suppliers
In April, nearly a month after the widespread shutdown of most apparel and footwear retailers across the country, J.C. Penney and Macy’s both continued to horde their cash—instead of spending it paying their vendors for orders. The move became a familiar one during the pandemic, with many attempting to defer payments by 30 days or more, through a unilateral extension tactic that dates back to the Great Recession. While delaying payments allowed retailers to regroup, the halted cash flow has the opposite effect on their partner brands, who in turn owe money to their suppliers across the globe. “Vendors in the apparel industry are typically undercapitalized. Most are privately owned and right now are skating on thin ice with regard to their capital base,” said Allan Ellinger, co-founder and senior managing partner of investment advisory firm MMG Advisors.
14. Coldwater Creek Shuts Down Six Years After Sycamore Rescue
After more than three decades in business, the pandemic claimed women’s specialty apparel chain Coldwater Creek as yet another victim in late July. The coronavirus “led us down a path we were not expecting,” the website read, after six years under the ownership of Sycamore partners.
Just a month later, though, Newtimes Group—which operates a robust network of sourcing offices and quality assurance hubs for American apparel brands—spent $12.2 million to acquire the retailer’s IP and inventory at auction. The brand’s new ownership said it would relaunch with a new catalogue and website ahead of the new year, and made good on that promise, reaching out to former customers in mid-December with an invitation to explore a new homepage and take advantage of deep discounts for the holidays.
15. Pantone Names the 10 Colors You Need to Know for New York Fashion Week
In early September, the Pantone Color Institute released its fashion color trend report for spring-summer 2021, providing a sneak peek into the top 10 standout colors for the season that would debut at New York Fashion Week. While the future of seasonal collections and the direction of design for a post-pandemic world remain in flux, the color experts encouraged trend watchers to look out for hues that speak to spring’s “renewing” nature, like marigold, coral and mint, along with vibrant blues.
In December, Pantone named two Colors of the Year for 2021: a sunny yellow called Illuminating, and cool, calming Ultimate Gray.
16. Report: Kohl’s Has Millions for Shareholders—But Not for Suppliers
In another installment of retailers behaving badly, Kohl’s came under fire in June for shelling out $109 million to its shareholders—instead of paying for $150 million in orders from garment factories in Bangladesh in South Korea. The store chain canceled those orders in March, leaving its partners—some of which had worked with Kohl’s for more than two decades—to seek a renegotiation of payment terms.
“Brands like Kohl’s say they care about workers, and use their big name to talk about ethical sourcing. But it is a lie,” said Kalpona Akter, the founder of the Bangladesh Centre for Worker Solidarity, a union for garment workers. “They cancel orders and refuse to pay for orders produced.”
17. First Look at Kanye West’s Yeezy Collection for Gap Surfaces
Despite months of erratic behavior and a failed presidential run, artist and Yeezy chief Kanye West is slated to move forward with his partnership with Gap. In October, one fan pieced together the mogul’s tweets from recent months, creating a makeshift line sheet of the forthcoming collection, which is set to debut in 2021. The Yeezy x Gap products include a T-shirt, hoodie, flight jacket, boots, duffel bag, windbreaker and a version of the infamous foam runner, all apparently priced to sell at $50. While the trendy range of products generated buzz, West spent considerable time this summer lambasting his brand partners, Gap and Adidas, tweeting that he was prepared to “walk away” from them without the promise of a seat on their boards. As the year draws to a close, West has not been named a board member at either company, and it appears his contracts remain intact.
18. Fashion Brands Risk Destroying Factory “Partners”–and Their Own Goodwill
Sourcing Journal founder and president Edward Hertzman questioned brands’ and retailers’ impulses to cancel orders and reduce inventory liability in an op-ed that ran in March. The former sourcing exec argued that such decisions were neither sound nor ethical, highlighting the outsized impact on garment workers in developing nations like Bangladesh, and pushing for a solution that would allow factory owners to pay their workers and avoid taking responsibility for the raw materials they purchased on behalf of brands. “Do not stop the supply chain, do not simply walk away from commitments,” he wrote. “Find a way to pay, defer, work on a plan with your vendors.”
19. What’s Going on With Penney’s Bankruptcy?
Bankruptcy sagas dominated headlines this year, and readers were particularly perplexed by revelations that the embattled department store missed its filing deadline in September regarding the asset purchase agreement for its operating arm to its two largest landlords, Simon Property Group and Brookfield Property Partners. While the filing was expected in mid-September, the retailer requested a 120-day extension so that it could continue to work out the details of the sale. J.C. Penney got the verbal nod from the bankruptcy court for confirmation of its plan of reorganization on Nov. 24, closing the sale of the company the next day.
20. Will Chico’s Pivot to Casual Clothing Curtail Bottom-Line Losses?
Like many fashion firms Chico’s FAS—which owns Chico’s, White House Black|Market and Soma—suffered losses due to a contraction of consumer spending and changing appetites throughout the Covid crisis. The company posted a wider second-quarter loss from year-ago figures this August, prompting an even greater push toward comfy, casual staples instead of work-ready attire. The retail group also said it would continue its pivot to focus increasingly on e-commerce and omnichannel services that allow shoppers to buy from home.
“Our core strengths—three distinctive brands with new product being well received, a strong digital platform, a differentiated real estate portfolio, our loyal customer base and solid balance sheet—position us for success,” president and CEO Molly Langenstein said at the time.