Big tech has already laid off more than 100,000 employees globally this year, according to Layoffs.fyi, with Chinese media giant Tencent and buy-now-pay-laten firm Affirm among the latest to cut staff.
Fears that cuts at Microsoft and Amazon would lead to job losses in the wider economy have so far proved unfounded. Despite warning signs that the economy is headed for a period of slow growth or even recession, the U.S. unemployment rate fell to 3.4 percent in January, a 53-year low.
However, fashion has not been completely immune to the need to cut costs. Neiman Marcus, PVH, VF Corp., Everlane and H&M are just a few of the retailers that have announced layoffs in recent months. Many cited economic uncertainty as the main reason for the job cuts, as consumer spending began to decline in the second half of 2022 (although US retail sales unexpectedly rose in January).
Retailers dependent on online sales are worse off as they also offset the post-pandemic pullback in online shopping. Canadian e-tailer Ssense, for example, laid off 138 employees, or 7% of its total workforce, last month, while RealReal said it would cut 230 jobs last week, or also about 7% of its workforce. potential.
For fashion companies bracing for a year of stagnant or declining sales, eliminating non-core corporate salaries and closing underperforming stores are relatively easy levers.
“Many brands and retailers expect 2023 to be a very quiet year in terms of growth,” said Neil Saunders, chief executive of GlobalData, a consultancy. “When people predict reductions, all it takes is a cost reduction to match [muted] demand.”
For some e-commerce companies that have cut jobs in recent months, it was a matter of adjusting for an aggressive hiring spree in 2021, when tech valuations and growth expectations were soaring.
Last July, Shopify announced it would cut 10% of its workforce, or 1,000 employees. CEO Tobias Lütke said in a note at the time that he had made the wrong call to expand the platform in 2020 in response to what turned out to be a temporary uptick in online shopping.
For others, the layoffs are a necessary step to protect profits at a time when sales are slow.
The first signs of a slowdown appeared last summer, when the post-pandemic growth streak — fueled by pent-up demand, high savings and joy about opening the world again — began to run out of steam. Second-quarter sales for companies such as PVH and VF Corp. were down year-over-year, a decline that carried over into the holiday season for many brands.
Across the board, retailers have lowered their forecasts for 2023 as they face not only declining consumer confidence but also rising operating costs, including raw materials and shipping. They also had to discount more products to reduce inventory overhang, hurting margins.
“With cost pressures increasing and demand weakening, the bottom line is going to come under a lot of pressure and many retailers are trying to avoid that,” Saunders said.
Barring an economic miracle, more layoffs are likely to come. Public companies face pressure from shareholders to cut costs. Large, established retailers can attract activist investors who will push for even deeper cuts, while startups that have seen their post-IPO share prices sink are scrambling to move up their timelines for profitability.
“In many cases, the layoffs were really the right decision,” he added. “During the 2021 boom, many retailers were quite hesitant to hire and based it on future forecasts of strong demand that is now waning.”
THE NEW BRIEFINGS
FASHION, BUSINESS AND ECONOMY
The Joan Mitchell Foundation says Louis Vuitton used paintings without permission. The estate of artist Joan Mitchell has asked Louis Vuitton to pull a new ad campaign, which reportedly features at least three works of art by the late abstract painter that were used without permission.
Mytheresa growth slows, profits shrink amid broader challenges for luxury e-commerce. Mytheresa said the value of goods sold on its platform rose 7.8 percent year-on-year to 216 million euros ($229 million) in the quarter to December 21, 2021, a slowdown from 21 percent growth the previous year Semester. Revenue rose just 1.3 percent year-on-year to 190 million euros, the luxury online retailer said, while adjusted EBITDA fell 37 percent to 17.7 million euros.
Farfetch sales fall, still beating expectations. Farfetch’s year-over-year sales decline continued in the final quarter of 2022 as the luxury e-commerce company faced continued geographic challenges in Russia and China. However, the company expects the new partnerships to help sales grow more than 10 percent in 2023 and reach $10 billion by 2025.
Ray-Ban maker Essilorluxottica’s sales are rising due to solid European growth. Luxury eyewear maker EssilorLuxottica on Thursday reported a rise in fourth-quarter revenue, citing healthy growth amid a challenging environment, but its performance in China was dampened by Covid-19 restrictions.
Lanvin Group reports 38% revenue growth in 2022. Lanvin Group on Friday announced unaudited annual revenue of 425 million euros ($454.5 million) for 2022, up 38 percent year-on-year. It is the first time the Chinese luxury group, which saw the departure of chief financial officer Shang Koo last month, has published financial data since its listing as a New York SPAC in December.
Zalando to cut hundreds of jobs. The German online fashion retailer is set to cut hundreds of jobs across the company, citing over-expansion in some areas and a tougher economic environment since the pandemic.
H&M teams up with Mugler for latest collaboration. Fast fashion giant H&M has teamed up with L’Oréal-owned Mugler and its creative director Casey Cadwallader for its latest designer collection, which will debut online and in select stores this spring.
Hermès will pay €4,000 bonuses to employees as sales increase. Hermès will pay a one-off year-end bonus of €4,000 to each of its 19,700 employees amid rising sales. Fourth-quarter sales rose 23 percent year-on-year, excluding currency fluctuations, Hermès said Friday. Full-year revenue rose 29 percent to 11.6 billion euros ($12.4), allowing the leather goods company to reclaim its position as the third-largest luxury brand behind Louis Vuitton and Chanel.
Watchfinder cuts prices by 15% as Rolex and Patek Philippe prices drop. Watchfinder & Co., the online watch selling platform controlled by Richemont, has cut prices by about 15 percent. Watch values have been hit by slowing economic growth, higher interest rates and the collapse of cryptocurrencies.
Forever 21 is relaunching in Japan as more upscale clothing. Forever 21, which came to formalize the fast fashion movement by selling trendy clothes to teenagers at rock-bottom prices, is relaunching in Japan by reinventing itself as a luxury outfit. Local partner Adastria Co. wants to open about a dozen brick-and-mortar stores in Japan and is aiming for ¥10 billion ($74.3 billion) in revenue in five years, Sugita said.
THE BUSINESS OF BEAUTY
Chanel is set to open a beauty store in Williamsburg this summer. Chanel is set to open a store in Williamsburg, Brooklyn this June, according to a government construction announcement published Sunday. It’s the latest luxury brand interested in the hip neighborhood as the work-from-home hybrid lifestyle dissolves spending outside of Manhattan.
Revlon reaches creditor settlement, sends bankruptcy plan for vote. Revlon Inc announced an agreement with a group of lenders, removing the biggest remaining hurdle to a plan that would allow the cosmetics maker to emerge from bankruptcy by April.
Beautycounter joins Ulta Beauty. The clean beauty brand, which was valued at $1 billion in 2021 after acquiring a majority stake in The Carlyle Group, will be available on Ulta.com starting February 26 and in 500 stores nationwide on March 5 . The move marks Beautycounter’s first major retail presence since doing a pop-up concept with Sephora in 2020.
Former Chanel CEO Maureen Chiquet joins La DoubleJ as president. In the newly created role, Chiquet, whose appointment is effective immediately, is tasked with helping to grow the brand, working closely with co-founders Martin and Andrea Ciccoli to capitalize on current momentum and spearhead global growth .
Carven names Louise Trotter his creative director. The former Lacoste and Joseph designer will be the new creative director of Paris-based Carven, the brand said on Wednesday. The brand, which has been owned by Chinese conglomerate Icicle since 2018, will return to the Paris Fashion Week schedule with Trotter’s debut in September.
MEDIA AND TECHNOLOGY
Alibaba beats quarterly revenue estimates as Covid curbs easing. Alibaba Group Holding Ltd posted better-than-expected quarterly revenue on Thursday as the Chinese e-commerce giant benefited from the easing of Covid-19 restrictions. Revenue rose 2 percent to 247.76 billion yuan ($35.92 billion) for the quarter ended Dec. 31, compared with Refinitiv’s estimate of 245.18 billion yuan from 23 analysts.
Written by Diana Pearl.