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-later company 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 US jobless rate fell to 3.4 percent in January, a 53-year low.
Still, fashion hasn’t been entirely 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 reducing headcount as consumer spending began to cool in the second half of 2022 (although US retail sales unexpectedly rose in January).
Retailers reliant on online sales are worse off as they are also making up for the post-pandemic backlash in online shopping. Canadian e-tailer Ssense, for example, laid off 138 employees or 7% of its total staff last month, while The RealReal said it would eliminate 230 jobs last week, or about 7% of its workforce as well.
For fashion companies bracing for a year of stagnating or falling sales, eliminating non-core corporate salaries and closing underperforming stores are relatively easy levers to pull.
“Many brands and retailers expect 2023 to be a very weak year in terms of growth,” said Neil Saunders, managing director of consultancy GlobalData. “When people are predicting declines, it’s about cutting costs to meet (muted) demand.”
For some e-commerce companies that have shed jobs in recent months, it was a matter of correcting a wave of aggressive hiring in 2021, when tech valuations and growth expectations were at an all-time high.
Last July, Shopify announced that it would cut 10% of its workforce, or 1,000 employees. Chief executive Tobias Lütke said in a memo at the time that he had made the wrong choice to expand the platform in 2020 in response to what turned out to be a temporary increase in online shopping activity.
For others, the layoffs are a necessary measure to protect profits at a time when sales are low.
The first signs of a slowdown appeared last summer, when the wave of post-pandemic growth – fueled by pent-up demand, high savings and joy that the world is open again – began to lose steam. Second-quarter sales for companies including PVH and VF Corp. dropped year on year, a decline that carried over into the holiday season for many brands.
In general, retailers have lowered their 2023 forecasts as they face not only falling consumer confidence but also an increase in the cost of operations, including raw materials and shipping. They also had to discount more products to reduce excess inventory, hurting margins.
“With cost pressures mounting and demand weakening, the bottom line will 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 follow. Public companies face shareholder pressure to keep costs low. Big, established retailers may attract activist investors who will push for even deeper cuts, while startups that have seen their post-IPO share prices plummet are struggling to accelerate their timeline to reach profitability.
“In many cases layoffs really were the right decision,” he added. “During the 2021 boom, many retailers were excited about recruiting and based this on future forecasts of strong demand that is now waning.”
NEWS COMING SOON
FASHION, BUSINESS AND ECONOMY
Joan Mitchell Foundation says Louis Vuitton used paintings without permission. Artist Joan Mitchell’s estate has required Louis Vuitton to run a new ad campaign, which reportedly features at least three artworks by the late abstract painter that were used without permission.
Mytheresa’s growth slows, profits decline amid broader challenges for luxury e-commerce. Mytheresa said the value of products sold on its platform rose 7.8% year-on-year to €216 million ($229 million) in the three months to Dec 21, 2021, a slowdown from 21-month growth. % in the previous quarter. Revenues rose just 1.3 percent year-on-year to €190 million, the luxury e-tailer said, while adjusted EBITDA fell 37 percent to €17.7 million.
Farfetch sales slump still beats expectations. Farfetch’s year-over-year sales decline continued into the final quarter of 2022 as the luxury e-commerce company faced continued geographic challenges in Russia and China. But the company expects new partnerships to help sales grow more than 10% in 2023 and reach $10 billion by 2025.
Ray-Ban maker Essilorluxottica sales rise on solid European growth. Luxury eyewear maker EssilorLuxottica reported a rise in fourth-quarter revenue on Thursday, citing solid growth amid a challenging environment, but its performance in China has slumped due to Covid-19 restrictions.
Lanvin Group reports 38% revenue increase in 2022. Lanvin Group on Friday reported unaudited annual revenue of €425 million ($454.5 million) for 2022, up 38% year-on-year. It is the first time that the Chinese luxury group, which saw the departure of chief financial officer Shang Koo last month, has released financial figures since listing SPAC in New York in December.
Zalando will cut hundreds of jobs. The German online fashion retailer is expected 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 high-low collaboration. Fast fashion giant H&M has partnered with Mugler, owned by L’Oréal, and its creative director Casey Cadwallader for its latest designer collection, which will launch online and in select stores this spring.
Hermès will pay €4,000 bonuses to employees due to increased sales. Hermès will pay a one-off €4,000 year-end bonus to each of its 19,700 employees amid increased sales. Fourth-quarter sales were up 23% year-on-year, excluding currency swings, Hermès said on Friday. Annual revenues rose 29 percent to €11.6 billion ($12.4 billion), allowing the leather goods maker to regain its position as the third-largest luxury brand after Louis Vuitton and Chanel.
Watchfinder cuts prices by 15% as Rolex and Patek Philippe prices fall. Watchfinder & Co., an online platform for selling used watches controlled by Richemont, lowered prices by about 15%. Watch values have been hit by slowing economic growth, higher interest rates and the collapse of cryptocurrencies.
Forever 21 relaunches in Japan as a luxury clothing brand. Forever 21, which came to symbolize the fast fashion movement by selling trendy and trendy clothes for teenagers at rock bottom prices, is relaunching in Japan, reformulating itself as a luxury clothing store. Local partner Adastria Co. wants to open about a dozen brick-and-mortar stores in Japan and aims for revenue of ¥10 billion ($74.3 billion) over five years, Sugita said.
THE BEAUTY BUSINESS
Chanel prepares to open a beauty shop in Williamsburg this summer. Chanel is set to open a store in Williamsburg, Brooklyn, this June, according to a government construction notice posted on Sunday. It’s the latest luxury brand to dabble in the trendy neighborhood, as the hybrid work-from-home lifestyle disperses spending outside of Manhattan.
Revlon reaches agreement with creditor and sends bankruptcy plan to vote. Revlon has announced a deal with a faction of creditors, removing the biggest remaining hurdle to a plan that would have seen the cosmetics maker emerge from bankruptcy in April.
Beautycounter joins Ulta Beauty. The clean beauty brand, valued at $1 billion in 2021 after private equity The Carlyle Group acquired a majority stake, will be available on Ulta.com starting Feb. 26 and in 500 stores nationwide on Feb. March. first major retail presence since 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 scale the brand, working closely with co-founders Martin and Andrea Ciccoli to capitalize on the current momentum and lead global growth.
Carven appoints Louise Trotter as creative director. The former designer at Lacoste and Joseph will be the new creative director of Paris-based Carven, the brand said on Wednesday. The brand, which belongs to the Chinese group Icicle since 2018, will return to the Paris Fashion Week schedule with Trotter’s debut show in September.
MEDIA AND TECHNOLOGY
Alibaba beats quarterly revenue estimates on Covid relief. Alibaba Group Holding Ltd reported 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) in the three months ended Dec. 31, compared with a Refinitiv estimate of 245.18 billion yuan prepared by 23 analysts.
Compiled by Diana Pearl.