Mountain Designs to close a third of stores in face of “increased competition”: Will retail store networks shrink in 2018?
Thursday, January 11, 2018/
“Right-sizing” looks set to become a top retail buzzword of 2018, say experts, with outdoor clothing company Mountain Designs to close one in three of its 39 bricks-and-mortar retail stores this year.
The company, launched in Brisbane in 1975 by climber Rick White, has confirmed it will close 13 stores over the coming months, as it looks to counteract the effects of a challenging retail environment, including “increased competition, price discount fatigue, [and] a decline in national consumer foot traffic”.
The company’s stores at Joondalup, Dubbo, Wagga Wagga and Toowong closed on the weekend, while those at Bendigo, Cannington, Toowoomba and Woollongong shuttered on Wednesday.
Stores at Pacific Fair, Ashmore, Bunbury, Moorabin and Warringah will also close, although the exact date for these closures has not yet been confirmed.
In a statement provided to SmartCompany, a spokesperson for Mountain Designs confirmed the company is still trading and not in administration.
However, the business says it is facing a range of challenges and had made the decision to close “underperforming stores”.
Earlier this week, the Courier Mail reported financials documents for the group pointed to a $7 million loss in 2016.
“With respect to recently reported financial details from 2015 and 2016, we can confirm their general detail as correct,” a Mountain Designs spokesperson said in a statement today.
“These can, in the main, be attributed to the flow-on effect from exiting the New Zealand retail industry in 2014/15.”
The news comes amid predictions 2018 will be just as challenging for local retail brands as 2017. At the start of the week, footwear label Diana Ferrari unveiled a strategic shift with an announcement it will close all bricks-and-mortar stores in favour of an online and third-party distributor sales model.
Other fashion imprints have also committed to change their footprints over the past few months. In November, Rivers and Katies owner Specialty Fashion Group said it will close 300 of its stores over the next three years, with a commitment to close loss-making sites as soon as possible.
Retail expert and associate professor at Queensland University of Technology Business School, Dr Gary Mortimer, predicts this will be the year that retailers across the globe look to downsize.
“While we have been seeing some retailers move into administration lately, others have been maintaining their brands,” he says.
“What retailers are saying is, ‘we’ll ‘right-size’ — that’s the big term they’re using this year, and saying, ‘we can’t have nearly the number of stores [we have now]’.”
From Sears in the US to department store Myer, Mortimer says bricks-and-mortar brands are looking to consolidate their sites with the acceptance that their offer’s value proposition may be “half of that of what it was 20 years ago” when competition wasn’t as tough.
This is particularly true in niche retailing sectors like sports and outdoor goods, Mortimer says, where the likes of Mountain Designs have been hit with competition from brands like Anaconda and BCF.
“There’s also a blurring of active and outdoor wear and ‘athleisure’ goods, where people are happy to put on Lululemon to go for a hike,” he says.
As insolvency experts predict there could be more pain to come for local brands in 2018, growth figures for the sporting and outdoor goods space suggest competition will be fierce for brands like Mountain Designs in particular.
A 2017 IBISWorld report into fitness and athletic clothing in Australia shows the $2 billion industry is set to slow, with its 7.5% annual sales growth rate over the past five years set to be replaced by a growth rate of just 2.9% over the five years to 2022.