Anthropologie’s Q4 2016 results have many seeing ghosts of J.Crew

Anthropologie’s parent company Urban Outfitters held its quarterly earnings call on Monday (March 7 2016) and also discussed its results for the fiscal year. Anthro saw 2% declines in comparable same-store sales, and profits were down due to heavy promotional pricing during the last quarter. Surprised? No you’re not. The Washington Post shared its thoughts about the state of Anthropologie in this fascinating article yesterday.

The 3-second summary of the article is that Anthropologie should beware the pitfalls currently affecting J.Crew, a thought that has not gone unexpressed many times on this blog and seems to be on the mind of retail analysts. J.Crew is struggling to turn around its women’s business, which had alienated its core customer by making a sharp left turn with its designs while at the same time sacrificing quality in the production process.

While J.Crew is slowly limping out of that pit it fell into, Anthropologie seems to be blindly flailing into the exact same pit. It was remarkable when Anthro managed to weather the storm of 2012 with positive results in all four fiscal quarters while every single one of its contemporaries floundered; yet somehow as other brands seem to be picking themselves up Anthropologie finds itself now falling down.

This is not all that surprising; certainly the readership here has been moaning for 2+ years about the design woes. The design team can’t seem to get their finger properly on the pulse of what its customer wants and misplaced strategies about “updating designs for the modern customer” don’t exactly help. All retailers are facing the issue of younger customers wanting new and fast and instant gratification and trying to reconcile that against the prices needed to make a profit. Yet nobody seems to remember that people will pay for quality and great design no matter what their age?

Anyway, here are some highlights from Ms. Halzack’s WP article:

“The problems are piling up, and they have a familiar ring to them. Last May, executives said Anthropologie’s sales took a hit when it whiffed with its line-up of spring dresses: Not enough casual frocks, they said, and some instances where the team missed the mark on fabrics, silhouettes or prices. And the struggles have only continued, with the retailer saying Monday that it ended up having to resort to promotions to sell unappealing dresses and sweaters in the back half of last year. Foot traffic was also lower at its fleet of 218 stores.

On a conference call with investors, chairman Richard Hayne was blunt about what’s ailing the brand.

“Clearly, the task at hand for the Anthropologie team is to improve the apparel assortment,” Hayne said.”


“It’s hard not to see the parallels between what’s ailing J. Crew and what’s ailing Anthropologie: Both chains are simply failing to offer shoppers the kind of clothes they are looking for. And while it was easy at first to write off Anthropologie’s stumbles as a temporary blip, a full year of unattractive merchandise in dresses — one of the chain’s most essential categories — raises questions about whether it might be slipping into a rut.”



“It’s not all bad news for Anthropologie: The company said that sales of home products, beauty products, accessories and shoes were strong in the latest quarter. In fact, Haynes told investors he is so bullish Anthropologie’s potential as a home goods retailer that he said he could foresee a future in which clothing accounts for less than 50 percent of the store’s sales. If the store can pull off that change in the mix of the business, it may not matter so much if the apparel category goes through a soft patch.”
I know we’ve discussed a lot of this to death already, but for the sake of leaving no stone unturned here again is my five-point manifesto for Anthropologie:
1 – Do what you do best. Classics with a slightly updated, feminine twist. No one likes wearing a box.
2 – Your ideal assortment is 20% workwear, 20% flexible workwear (meaning items that can double as both work and casual wear), 30% casual and weekendwear, 10% sleepwear, 5% fine garments and the rest can be divided up however the heck you want. Do not attempt to replicate any trends lesser stores are interpreting at a lower price point — this is a losing battle. Pay attention to curves and busts in your designs.
3 – Quality is key among your customers. Buttons that aren’t loose, zippers that zip, embellishments that stay on, items that do not fall apart on the first or second wear; fabrics that can survive washings without becoming distorted, shrinking or worse. Make it clear that you pay attention to your production process and won’t accept less than excellent quality. Kudos for your return to cotton, synthetics are not bad but should be deployed sparingly. 
4 – Nothing is more insulting to customers than poor customer service. Online orders should arrive nicely packaged (dresses stuffed and wrinkled into a plastic bag does not inspire spending lust), with a signed-off quality check. Shipping charges need to be rethought. Customer service should have a “I’m going to help you to the best of my abilities” approach. 
5 – Inspire your customers by showing how versatile your clothing is. I love, love, SO love the individual store Instagram feeds! As well as the Anthro PS feed. More like this please.

For what it’s worth I’m seeing some lovely turnaround at Anthropologie, and my wishlist is fuller than it’s been in a while. Is there room for further improvement? Absolutely. But I am optimistic based on what I’m seeing.

Also, record scratch, what the heck does Mr. Hayne mean that Anthro may someday be less than 50% clothing sales???? Has he been watching the furniture industry lately?

Finally, a huge congratulations is due to Anthropologie Group CEO David McCreight, who was promoted to President of Urban Outfitters, Inc. at the end of February. Mr. McCreight takes on this new title while retaining his former position’s duties. Awesome!

Further reading:
Urban Outfitters (URBN) Richard A. Hayne on Q4 2016 Results – Earnings Call Transcript — Seeking Alpha

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