When Retail Gets Tough, Cool Counts for a Lot

This season made it very clear which retailers are cool with younger shoppers, and which aren't.
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Eliza Brooke
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This season made it very clear which retailers are cool with younger shoppers, and which aren't.
A Burberry store. Photo: Kevin Lee/Getty Images

A Burberry store. Photo: Kevin Lee/Getty Images

Fashion may be an opaque business at times, but four times a year, publicly traded clothing companies are obligated to pull back the curtain to share their financial results for each three-month quarter. As October and November's spate of reports on brands' performances in the late summer and early fall winds down, it seems that players at both the luxury and accessible ends of the fashion spectrum were united in their difficulty to move sales.

As nearly every luxury executive team acknowledged, they're operating in a tough retail environment right now. China, for instance, isn't spending as much as it has in the past: LVMH noted a resulting drop in its wines and spirits business, while comparable sales at Burberry softened in the region. Continued uncertainty in Hong Kong and China helped nudge Hugo Boss and Estée Lauder to cut their sales forecasts for the remainder of the year.

In the States, that challenging environment extended all the way down to mall brands. Sales at Macy's clocked in just below last year's numbers, owing to a bad back-to-school season, decreased consumers spending and warmer fall temperatures. Steve Madden, too, came in just a notch below last year at $392 million in sales.

In light of that less-than-booming consumer economy, the quarter made it very clear which retailers are cool with younger shoppers, and which aren't. And those that did win were the ones who executed on fashion's current mood in the most clear-eyed way.

Free People, with its chokehold on festival style, saw same-store sales rise 15 percent. Asos, a machine at turning out runway looks reinterpreted for real life, has been doing well, as has Uniqlo, a positive playground for those inclined toward inexpensive basics. 

Right place, right time, done right. Because if there's one thing millennials intuitively get, it's #branding — and they can sniff out weakness in seconds. 

Gap, with its still-murky aesthetic messaging, experienced a 5 percent drop in comparable sales. And Urban Outfitters took a 7 percent same-store sales hit, which owed in part to badly managed in-store assortments.

Cachet made a difference in the luxury world, too. Case in point: Balenciaga and Hugo Boss, each of which has recently appointed a hot young designer (Alexander Wang and Jason Wu, respectively) to head up design. According to Kering, Balenciaga saw double digit revenue growth for the third quarter, while sales of Hugo Boss's women's collection grew 12 percent

If people are reluctant to spend, they're only going to drop their cash on product that really carries its weight.

Winners

Michael Kors: Still on a warpath, Kors saw sales grow 42.7 percent in the three months ending September 27. But it's getting ready for a tighter holiday season.

Free People: The brand didn't grow as much as it has in past quarters, but it's still miles ahead of its sibling, Urban Outfitters.

Boss: Hugo Boss's women's line outpaced its men's, which reduced its overall sales growth to a still-respectable 9 percent.

Losers

Burberry: Although the brand's revenue grew 7 percent, unfavorable exchange rates cut down the British brand's profit margins from 16.8 percent to 13.8 percent. 

American Apparel: Sales at the company dropped 5 percent in the quarter. How much of that can be attributed to bad PR from founder Dov Charney's suspension is unclear.

Urban Outfitters: The brand's "disappointing" performance sunk Urban Inc.'s overall comparable sales down by 1 percent and limited its revenue growth to just 5 percent.

Homepage photo: Timur Emek/Getty Images