Men's Apparel Retailers
Date February 2019
- Industry leader Tailored Brands generated negative 1.4% consolidated comparable stores sales for the holiday 2018 period, with its Men’s Wearhouse banner driving the decline
- Demand for suiting and business casual wear is highly dependent on employment levels; with unemployment at historical lows, major retailers have shown revenue increases in the past year
- Casual clothing brand UNTUCKit has rapidly expanded from online only to bricks and mortar, opening 50 stores in three years
- E-commerce continues to pull revenue from traditional menswear retailers
Approximate net recovery on cost
Mixed holiday results and industry outlook: Despite all four banners generating positive sales for the third quarter of 2018, industry leader Tailored Brands struggled with negative comparable (comp) store sales for the holiday period driven by a decrease of 3.6 percent for its Men’s Wearhouse banner. The company’s major competitor in the big and tall space, Destination XL, managed to perform well for both periods, with Q3 comp sales up 3.4 percent, followed by an increase of 3.6 percent for the nine-week holiday period ended January 5, 2019. Up against fierce competition for every dollar spent, the men’s specialty apparel industry continues to find growing competition from online retailers and discount stores.
Revenue for the Men’s Clothing Stores industry has decreased over the past five years at an annual rate of -1.6 percent. Looking ahead, the industry is expected to contract even more rapidly over the next five years at an annualized rate of negative 2.7 percent, with a projected decline of 2.8 percent in 2019 alone. The decline will be driven by an increase in online purchases, as well as demographic changes including the retirement of the older generation of baby boomers, further limiting revenue from that group.
Rising competition from discount retailers will continue to pressure the industry as well. Positive factors keeping the industry from declining even more quickly include the overall positive state of the economy and a forecasted increase in per capita disposable income, which are expected to help the industry at least in the near term.
The success of online retail: Digital retail continues to grow across all sectors, with e-commerce sales comprising almost 10 percent of total sales for 2018, a figure that has steadily grown since 1999. For Destination XL, e-commerce sales for Q3 2018, which included the company’s sales through Amazon, increased to $21.6 million, representing over 20 percent of company revenue. Although Tailored Brands does not report its e-commerce sales separately, the company’s digital strategy looks to increase conversions by connecting online shoppers with in-store sales associates in real time based on reporting from Creditntell.
Online competitors like UNTUCKit and MTailor have also begun claiming market share from traditional menswear retailers. MTailor claims to have eliminated the hassle of getting fitted for suits, jeans, and shirts by creating custom fit clothing at competitive price points. Using the company’s app, customers scan for their measurements with their phone, and then customize designs and fabrications from a variety of shirt, suit, and jeans styles online. Customized orders are then delivered in approximately two to three weeks. UNTUCKit, which has seen huge growth in its casual (untucked) shirt business since its start in 2010, recently expanded into brick-and-mortar locations, and now has 50 stores across the country.
The athleisure trend contiinues: The increasing popularity of athleisure wear has influenced both men’s and women’s apparel over the past year. As companies move away from business dress codes and more companies expand their remote work policies, menswear trends continue to favor the casual.
Lululemon, Mack Weldon, Brooks Brothers and others all now offer tailored fit, “dressy” sweatpant options that allow men to look pulled together, yet remain comfortable. Mack Weldon encourages its customers to “give your sweats a grown-up makeover” and offer a lightweight sanded French terry fabric that has a “smooth finish and sophisticated look that feels as good on the couch as it does around town.”
In terms of gross recovery values, the increase in demand for casual men’s clothing to suit changing life and work styles could mean that tailored shirts, dress pants, and suiting would recover less in a liquidation due to a dwindling customer base for those products. It is important for lenders to partner with appraisers on an ongoing basis to understand where there may be depth of inventory in less popular styles in order to correctly assess potential compromises in recovery value.