Fashion brands across the industry are cutting costs, laying off employees and closing stores to make up for falling revenue. Don’t forget to subscribe to the Glossy Podcast for interviews with fashion industry leaders and Week in Review episodes, and the Glossy Beauty Podcast for interviews from the beauty industry. –Danny Parisi, sr. fashion reporter
The great belt-tightening continues
Last week, Levi’s posted earnings showing a $10 million loss against a $100 million profit from the same period last year. Yet despite that change, Levi’s is confident that this year its profits will return.
A big way it plans to get there is by cutting costs. The company has already had a round of layoffs this quarter, hitting not just low-level employees but senior leadership, as well.
While cutting costs is a good way for brands like Levi’s to gain control of falling profit margins, it’s not the best long-term move. You can only cut so many costs before you need to start boosting revenue. Glossy editor-in-chief Jill Manoff and I discussed as much when we spoke about PVH’s earnings this week on the Glossy Week in Review Podcast.
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PVH similarly saw its revenues falling but managed to salvage some of its profits by cutting costs. The company expects its revenue to drop by 11% this year.
Across the industry, brands have been cutting costs and tightening belts to compensate for reduced revenue. Frequently, these layoffs are happening in brands’ technology division. Amazon has laid off hundreds of people, including from its physical retail technology division, as of this week. Nike also laid off around 1,600 people a month ago, many of them senior leaders in both the technology and marketing departments.
Both of these companies are sharpening their focus on core products and practices and spending less on experimentation. That constriction of focus is happening across the industry. Levi’s, for example, will also reduce the number of SKUs it offers by around 15% this year.
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Rent the Runway is also cutting costs, announcing the layoffs of 10% of its workforce in January as it seeks to focus its efforts on marketing and growing its inventory.
But not every brand in fashion is curbing spending. Luxury brands are still spending big. Kering is reportedly dropping over $1.4 billion for a retail property in Milan that houses stores from other luxury brands like Prada. Despite the luxury market still recovering from the down period it went through last year, profitable and growing companies like Kering and Zegna are still able to expand while the rest of the industry cuts.
