Haven't been at the mall lately? You're not alone, and that trend is causing once-popular retailers of the '90s and aughts to go belly up.
This year has already seen the demise of dElia's, Wet Seal, and Quicksilver. Others, like Aeropostale, American Apparel, Bebe, and Pacific Sunwear remain on life support, having become penny stocks that are just waiting for the call from the pink sheets.
What happened? It's partly because the kids grew up. Retailers found that where Gen Y teens could be swayed into walking around wearing the modern-day equivalent of sandwich boards, Gen Z teens didn't want anything to do with having company logos emblazoned on their clothes. Instead they've opted to go with disposable fast fashion from outlets like H&M, Century 21, and Uniqlo.
So, which brands might disappear next? Here are three that look doomed unless they change their ways.
Abercrombie & Fitch (NYSE:ANF)
Too little, too late sums up Abercrombie's response to its off-putting "cool kids only" marketing ethic and logo-centric clothes. Sure, it finally started selling plus-sized clothes and got rid of the models it planted in front of its stores to attract good-looking shoppers, but it still sells way too many outfits with the Abercrombie name on them.
Quarterly sales have fallen for 10 straight quarters, even at Hollister, its surf shop-cum-fast-fashion concept. And though the strong dollar is wreaking havoc on companies reconciling foreign currencies back to the U.S., Abercrombie is plowing full steam ahead with its plan to open 15 new stores internationally this year.
Even with a $408 million cash horde, year-to-date losses increased six-fold from the same period in 2014, suggesting Abercrombie & Fitch may eventually be one to succumb.
When you're chasing fashion trends rather than leading them, you're at risk, and Gap's decision to remake all of its stores into fast-fashion houses shows it's following, not leading the retail industry.
Comp sales are also down for 14 straight months and there's no indication the tide is turning. While its Old Navy concept seems to have successfully made the leap to fast fashion (second-quarter sales were up 3%), Gap is looking to turn its namesake stores and Banana Republic shops into disposable-clothing retailers, too. CEO Art Peck assured analysts the retailer wants to layer the supply chain success of Old Navy onto its other concepts in time for spring 2016.
With Gap's comps down 7% last quarter and Banana Republic's plunging 10%, it needs to do something, but as Abercrombie has proven, just because you transform a concept into a fashion-forward store doesn't mean it will be a success.
Remember those retailers taking a hit from the strong U.S. dollar? Yeah, Guess? is one of the poster kids for that phenomenon. Its second-quarter earnings tumbled 17% to $18 million, with per-share profits falling 19% from the year-ago period to $0.21 as currency fluctuations swiped $0.10 per share.
Not that Guess? was doing great otherwise. Sales in the Americas were down 5%, and its e-commerce division, the one segment most retailers can point to to show signs of life, suffered a 3% drop. But it's even struggling overseas, with sales in Europe down 4%, and sales in Asia dropping 6%, all sans currency fluctuations.
Revenues have declined for three years running, causing it to shrink its footprint by closing nearly 30 stores so far in 2015, on its way to shuttering 50 within the next year in a bid to get a handle on costs.
There is also a new CEO at the retailer, but with fashions that still accentuate the Guess? logo, and styles that don't appear to be changing with the times, it looks like he could be a captain who goes down with his ship.
Retail on death watch
The clock is ticking on these retailers who, though not in danger of going out of business tomorrow, run the risk of following their failed brethren who refused to change direction before it was too late.
Each, though, has a unique opportunity to reverse the course they've set, and even if they don't regain their former glory and growth trajectories, they could still provide investors with meaningful returns.
Rich Duprey has no position in any stocks mentioned. The Motley Fool owns and recommends Coach. The Motley Fool recommends Guess?. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.