Retail has been programmed toward growth, which is what got us in the problem. The nature of that seat is to desire to do something special. “CEOs are generally not hardwired to shrink. “The question right now is, Who owns their destiny?” Siegel said. Many, including John Idol, CEO at Capri Holdings, and Chip Bergh, CEO of Levi Strauss & Co., have been vocal about being willing to run more profitable, healthier businesses even if that means giving up some size or accepting slower sales growth.īut how many will be able to hold the line as pressures increase and Wall Street continues to seek growth? That might depend on how other chief executive officers across the industry react to the growing pressures - on cotton costs, on freight, on labor and more. “People are asking, ‘Is Old Navy the beginning of the end?’” Siegel said. That sounds a lot more like the familiar retail narrative defined by price promotions than the power-margin story the industry was settling into last year. The retailer said it has “taken a more aggressive approach to assortment balancing resulting in increased promotional levels primarily at Old Navy.” That is particularly true at Gap Inc., which last week cut its sales outlook and shook up leadership at the struggling Old Navy. Over the long run, he described it as “net neutral” for retailers, but acknowledged “it feels negative now.” ![]() ![]() “When costs go up, retailers and brands and investors are trained to believe there’s room to raise price,” Siegel said. It’s not just a novel situation, but a disorienting one for investors who fell in love with the peppier look retail had last year with sweeter margins and strong growth prospects. rising 8.5 percent over the past year, bringing the sector back down to earth.īMO analyst Simeon Siegel calls the progression “reverse inflation.” Now costs are going up in earnest with inflation at a 40-year high, with prices on all goods and services in the U.S. That made for an industry filled with hot companies with better margins and led to more interest in the consumer sector (as evidenced by the string of fashion IPOs).
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