Suddenly, every retailer is into disposal clothing. The success of H&M (NASDAQOTH:HNNMY), Forever 21, and Zara is creating a conga line of imitators from the ranks of traditional retail that are rushing to join the bandwagon. From Abercrombie & Fitch (NYSE:ANF) and Gap (NYSE:GPS) to stodgy department store chains such as J.C. Penney (NYSE:JCP), retailers are hoping the trend's halo effect will rub off on them.
While the industry apparently views fast fashion as some sort of panacea that will cure all its slow-growth ills, one retailer has decided to buck the trend and is actually going in the other direction.
Although it was a seemingly small move from American Eagle Outfitters (NYSE:AEO), its acquisition of high-end designer Todd Snyder for $11 million suggests the retailer is signaling a bearish outlook of fast fashion. And there is a lot of evidence beginning to pile up that pulling clothes from runways and putting them on racks in a matter of weeks rather than months may have run its course.
There has been a mixed bag of success among traditional retailers experimenting with the trend. Gap, for instance, has successfully changed its Old Navy brand into something of a fast fashion house, so much so that it wants to implement the strategy companywide. But Abercrombie & Fitch has been less successful with its Hollister brand, with net sales dropping 6% in the second quarter, and comparable-store sales falling 1% (albeit that's an improvement over the 6% decline in the first quarter).
Then there are the struggles the fast fashion trendsetters themselves are experiencing. Japan's Fast Retailing is reining in its expansion plans for U.S. suburban malls, a field it thought it could populate with 200 or more stores by 2020. It has only managed to open up 44 stores and recently announced it was slashing by two-thirds the number of new stores it had planned to open this year. Instead of 15 more locations, it's only opening five due to the poor performance of the dozen it opened last year.
Similarly, H&M, which is one of the leading banners in the niche, is seeing growth slow. Sales were up just 12% over the first three quarters of 2015, a 20% decline in the rate of growth achieved the year before in the same period.
That could explain why it's now moving into makeup, hoping to do for beauty and personal care what it did for clothes. While J.C. Penney has used its partnership with beauty care specialist Sephora to help stage a renaissance after nearly going bankrupt, success for H&M isn't assured as quality ingredients remain a high priority for consumers. Cheap makeup can be had at any corner drugstore, so H&M can only hope to benefit from the halo effect its own brand could bring to the market.
And now American Eagle is eschewing the low end of the market in favor of going upscale, and by extension, offering higher-quality, more expensive clothes. It's always been a fairly disciplined retailer when it comes to pricing, though last year it discounted a lot as it sought to clear out inventory, so a move toward cheap chic might have come off as especially inauthentic for the retailer.
While the Todd Snyder acquisition is likely just as much (if not more) about getting hold of his Tailgate brand, an upscale collection of classic collegiate sportswear -- American Eagle wants to open as many as 200 Tailgate stores in the years ahead -- it's still an affirmation of traditional clothing lines that survive years of evolving fads and tastes and suggests the retailer believes fast fashion's ascendancy may have peaked.
Rich Duprey owns shares of J.C. Penney Company. The Motley Fool has no position in any of the stocks mentioned. 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.