Fast fashion slowing down…

ASOS SHUTTERING up its less than two year old £90 million state-of-the-art distribution centre at Fradley Park is mildly shocking but not unexpected and it isn’t the first fast fashion retailer to go down this route. Boohoo Group set about closing  its 287,634 sq ft distribution centre on the Park Farm Industrial Estate in Wellingborough in January this year - it only opened in April 2021. The two e-commerce groups, are facing significant financial headwinds. ASOS recently reported that revenue fell 10% in the year to September and said it did not anticipate a return to profit until 2025. Boohoo shares slumped to an eight-year low after the UK fast-fashion retailer cut its earnings and revenue forecasts as it lowered prices to attract cash-strapped shoppers. It said it expected half year sales to be down 10-15%. There are a multitude of reasons for this state of affairs – first growing too quickly in an attempt to satisfy the explosion in online demand during the pandemic which then tailed off almost as rapidly – this was the main reason Amazon cited for the closure and mothballing of warehouses in the US last year and is a significant reason for mothballing warehouse properties here in the UK which it never occupied. 

It’s not just in the UK, German online fashion retailer Zalando’s shares dropped as much as 7% following its announcement that it was cutting its staff by 5% in February this year after admitting the company had become ‘bloated’ during the  pandemic years. Then there were higher freight and energy costs, a wet summer plus an unseasonably warm autumn, and the nail in the coffin for most has been sticky inflation hitting consumer demand. The most recent ONS retail sales figures for September 2023 note that non-store retailing (predominantly online retailers) sales volumes fell by 2.2%, following a fall of 0.9% in August. To be honest it’s not just the online only fast fashion companies that are struggling – it’s fashion across the board. The ONS reported that clothing store sales volumes fell by 1.6% in the month to September. This was reflected in Barclays consumer card spending reporting that consumers were cutting back on non-essentials with 52% saying their discretionary spending has been hit due to rising household bills. And 59% had decided to reduce their spend on new clothes and accessories. Not all fashion retailers are closing down stores and warehouses but there are definite moves to cut costs. Fashion chain New Look, did not close either its 395,000 sq ft or its 398,000 sq ft warehouses at Lymedale Business Park, Newcastle-under-Lyme in Staffordshire, it instead removed the night shift with the loss of  some 500 jobs in February this year.

Some fashion companies facing difficult financial headwinds have not survived – or at least not independently. Joules, which was bought out by Next in January this year is one. Its 58,350 sq ft Corby warehouse closed and was snapped up by Hortons Estates which is refurbishing the building. The newly-named Saxon 58 will be available for occupation from April 2024. While nothing has been said yet, this could be the fate of fashion retailer Fat Face’s 80,000 sq ft distribution centre in Dunsbury Park in Havant which it pre-let in 2017. FatFace was bought out by Next only last month. It is interesting to note omnichanel companies such as M&S and Next have actually done better than predicted as consumers change their habits yet again and return to high street shopping - although being far more savvy, using mobiles to compare prices before ordering online after seeing the goods IRL (in real life) on the high street. Next raised its full-year profit guidance for the fourth time this year as the onset of cooler weather boosted sales in the second half of October. The group added £10 million to its profit forecast on 2 November. Profits now stand at £885 million for the full year. This followed a 4% increase in sales during the three months to October 28, which doubled the pace of growth previously anticipated.

A bit of good news then….