Pandemic flushes out winners and losers in the ever-evolving retail industry

Tim Feran
DSW sells discounted brand-name and designer shoes and handbags.

It looks like just another Zoom chat in a pandemic year full of them. Two colleagues—let’s call them “Kim” and “Andy”—have a friendly discussion about work. Kim sits center screen with a tastefully decorated room as her backdrop. Andy, obviously a laid-back guy, barely appears at the bottom of his screen, which is improbably dominated by a couple of closet doors and the bedroom ceiling.

But instead of the usual banter about work, this is an earnings call chat between two high-powered business players—Morgan Stanley Managing Director Kimberly Greenberger and L Brands and Bath & Body Works President and CEO Andrew Meslow.

The contrast between the prosaic 2020 webcast and previous years’ glamour-packed presentations could not have been more striking—or more emblematic of the changes COVID-19 has hastened at L Brands and among Columbus’ publicly traded retail giants in general.

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Even before the pandemic, big Columbus-based retailers were scrambling to meet rapidly changing consumer tastes and shopping habits, not to mention the impact of the retirement of the godfather of Columbus retail, Les Wexner, the founder of L Brands.

“The whole COVID-19 thing has been an accelerator and not a disruptor,” says Lee Peterson, an executive vice president at WD Partners, a Dublin retail consulting company. “The demise of specialty retail, the demise of millions and millions of square footage of retail real estate, was already happening. The malls were already getting vacant, and now they’re really vacant.

“Retail has always been Darwinian, but with COVID coming along, this is a Darwinian process— survival of the fittest—on hyperspeed. It’s going to shift even more rapidly. Something that might have happened in 20 years is going to take four or five years at most.”

To illustrate this shift, Peterson points to a survey WD Partners took two years in a row—in July 2019 and July 2020. In the two studies, consumers were asked to rank the ways they preferred to shop, online or in stores, or some combination of both.

In 2019, the majority of consumers—about 74 percent—said even after 20 years of Amazon aggressively wooing them to shop online, they still preferred to shop in a brick-and-mortar store. However, a year later in the middle of the pandemic, the consumers who preferred to shop in a store had plummeted to 48 percent.

“Talk about accelerated,” Peterson says. “There’s about 30 percent who are not going back to stores even after the pandemic ends. Think of all those seniors and older baby boomers who used to enjoy going to stores. Not anymore. They’ve gone from zero to 100 percent. Even Gen Z, they say they prefer shopping in stores, but they don’t. I think they prefer to hang out in stores (to socialize), but they’re not going there to buy something.”

In the face of such a massive change in shopping habits, “there’s this huge metamorphosis going on, a distinct bifurcation that COVID-19 sped up,” Peterson says. At one end of the spectrum are new ventures, nimble little startups “that will become the new specialty retail. Think about it: You can start a really strong business in your basement now. At the other end of the spectrum are the massive corporations, the guys who had the wherewithal to shift to the changes in the way the modern consumer shops. Those are guys like Walmart, who were on top of the whole buy-online-pick-up-in-store trend at least four years ago.”

The retailers in the middle, especially those who are predominantly mall-based? “Their doom got accelerated,” Peterson says. “Everyone could see it coming.”

Zombie-walk fashion

Express, the purveyor of mall fashions that got its start as a brand at Wexner’s flagship The Limited, was chasing the buy online, pick-up in store model pre-COVID, but it was too slow.

Then the pandemic came along and painted Express into a corner that will be difficult for the retailer to escape.

During the third quarter, Express reported a loss of $1.39 per share, much worse than Wall Street expectations of a loss of 47 cents per share. For the past few years, Wall Street has taken an increasingly dim view of Express executives’ efforts to revive company fortunes. In March 2016, Express stock sold for about $21 a share. Two years later, in March 2018 the stock was selling for a little more than $7 a share. By March 2020, the stock was scraping along between $1 and $2 a share, flirting “with penny stock status,” one analyst says.

A big part of the problem: During the pandemic, the company’s typical customer works from home and wears sweatpants and T-shirts. That customer has little need for men’s suits or women’s cocktail wear, and “our historical strength has been in occasion-based dressing, so of course we have been disproportionately impacted,” CEO Tim Baxter acknowledged in an earnings call. As a result, Express at one point during the summer had to cancel an order of 500,000 men’s dress shirts, “our biggest category.”

Company leaders rowed as fast as they could all year long, trying to keep the Express boat from being swept away in the currents. They reduced the corporate workforce, permanently closed 100 stores and pushed to meet the demand for buy-online, pick-up-in-store. And they began testing an off-mall location substantially smaller than any existing Express store.

But it all seemed too little and too late to Wall Street doubters. Even Express officials acknowledge that after stores reopened following the pandemic shutdown, “traffic has been consistently off by nearly 50 percent when compared to last year.”

In a note to investors, D.M. Martins Research founder and portfolio manager Daniel Martins wrote that he feared that Express shares “will continue their descent to oblivion in zombie-walk fashion” after a sales decline that was “one of the steepest that the company has ever printed.”

“Express is one of those cases in retail in which the company’s demise had been forming slowly since well before COVID-19 struck,” Martins says. “The pandemic seems to have been the straw that broke the camel’s back, rather than the root cause of the retailer’s troubles.”

The dire news kept coming all during 2020 for two brands that had been circling the drain for several years before the pandemic hit.

Ascena Retail Group, owner of two central Ohio-based brands—plus-size women’s clothier Lane Bryant and “tween” fashion retailer Justice—was riding high in March 2016 with a stock price of $217 per share. But by March 2018, after a series of costly missteps that indicated the company wasn’t aware that the ground was shifting under it, shares plunged to about $40.

By the time the pandemic hit in March 2020 and the company was forced to close its stores along with almost all other retailers, Ascena stock price was a measly $1.63 a share.

So it was hardly a surprise when, in July, Ascena was forced to throw in the towel and file for Chapter 11 bankruptcy protection.

The company, which at the start of 2020 had about 1,500 employees in its Columbus and New Albany operations, immediately laid off more than 300 workers who worked for Justice and Lane Bryant. While private equity firms Bluestar Alliance and Sycamore Partners have bought the respective remains of Justice and Lane Bryant, few expect the new owners to return the one-time L Brands stablemates to their glory years.

“The fallout from the coronavirus pandemic exacerbated Ascena’s long-standing brand and execution issues, as well as the ongoing challenges in the apparel retail sector,” Moody’s vice president and senior analyst Raya Sokolyanska says. “Significant challenges remain.”

Digital is king

While those companies struggled, there are other Columbus-area retailers that were well-positioned to meet the challenges of 2020, and sometimes to profit from them.

Designer Brands’ DSW began its reorientation toward modern customers’ needs several years ago, led by CEO Roger Rawlins. Significantly, Rawlins rose through the ranks at DSW on the then-new digital side of the business. As CEO he emphasizes the integration of online and in-store functions, so much so that he and other company officials refer to their 500 brick-and-mortar stores as “warehouses” that not only serve as retail locations but as distribution centers.

That proved to be “a competitive advantage as retailers shifted to digital-only sales beginning in the second half of March,” Rawlins said in an earnings call. “We essentially became a dot-com only retailer starting on March 18,” CFO Jared Poff agreed. “We actually had three of the six biggest (e-commerce sales) days in the history of our company after stores closed,” Rawlins says, “like Black Friday, Cyber Monday kind of days. All these omni tools we have invested in, we were fulfilling 80 percent, 90 percent of that demand out of our what we call warehouses.”

To beef that up, Designer Brands signed a deal in April with supermarket chain Hy-Vee to add more locations for buy-online, pickup-in-store.

Even so, DSW scrambled in 2020. During the initial lockdown, “we ended up having to furlough about 88 percent of our entire workforce,” Rawlins says. DSW also announced “reduction in compensation for nearly all employees not placed on temporary leave as well as the board, and the freezing of hiring and merit raises for 2020.”

DSW also rushed to respond to the immediate change in customer choices as fewer people wanted or needed business attire and more people wore comfortable “athleisure” shoes.

“Jared and I were in the office for the first time (in June after the shutdown) and I said, ‘I think it’s the first time in 13 weeks I have actually worn a pair of pants that’s not a sweat pant,’

” Rawlins says. “So we’re going to continue to figure out ways to get after this athleisure kind of look.”

Even so, all that work couldn’t prevent the coronavirus from having a crushing impact on DSW. In the first quarter of the pandemic, the company lost $216 million and, in late July, the company cut its staff by more than 1,000 positions, eliminating about 380 corporate office positions and 700 store jobs.

Flagships set sail

Abercrombie & Fitch is another brand that was in the throes of a massive turnaround when the pandemic hit.

“I think the expression goes, crisis accelerates change,” CEO Fran Horowitz said during an earnings call, “and that’s certainly what we’ve seen throughout this whole year. We’ve really been able to lean into our omni capabilities and build on the strength of our digital business to over $1 billion, a growth of 47 percent just in the third quarter.”

Significant investment integrated online and in-store for Abercrombie, and it also focused on improving customer engagement via social media, a big deal for the company’s youth-oriented Hollister brand. During the third quarter, the company’s partnership with social media stars Charli D’Amelio and Dixie D’Amelio helped launch its back-to-school jeans campaign along with fellow influencer Noah Pugliano and teen favorite Bill Nye the Science Guy. That campaign had more than 5.4 billion views on TikTok and was the top TikTok brand campaign of the year based on brand lift metrics.

The pandemic also sped up Abercrombie’s moves to shift its brick-and-mortar stores to smaller locations and away from its big, tourist-oriented flagship stores.

“Large, expensive flagships are really not part of our go-forward strategy, and we have been working really diligently with our landlords over the past few years,” Horowitz says. “We don’t really know where the stores are going to end up. We’ve got a lot of leases due at the end of (2020). Ultimately, our goal is to be a global omnichannel retailer, balancing both digital as well as stores. The stores do matter because you need both in order to be effective in omni.”

The big nesting spend

Unlike other retailers who have struggled to meet the challenges of the pandemic, Big Lots has actually seen some boosts from the rapid changes in customer behavior. During the third quarter, the discount and closeout retailer reported its highest-ever earnings, far exceeding 2019’s figure.

“We have seen continued momentum from the COVID-induced nesting trend,” President and CEO Bruce Thorn said during an earnings call. “The current way of living, our assortment of everyday essentials and stay-at-home products continues to strongly align with customer wants and needs.” In 2020, Big Lots introduced curbside pickup. In July, the retailer launched same-day delivery from, allowing delivery of items as large as furniture and mattresses and as small as snack food and cleaning products.

Like DSW, Big Lots spent the past few years integrating its online operations with its brick-and-mortar locations, a point that Total Retail magazine highlighted when it named Big Lots as its top omnichannel retailer of 2020. The award “is validation of how quickly we have adapted our approach to meet our customers’ evolving needs,” Thorn says.

“While it was very difficult for all of us to go through COVID-19, we picked up a lot of new (customers) and they discovered Big Lots maybe for the first time in 2020,” Thorn says.

Business went so well in the past year, in fact, that Big Lots plans “a marked acceleration in the growth of our store” number in 2021, including the company’s highest number of first-quarter openings “in many years.”

Back at the Zoom call with “Kim” and “Andy” there’s good news, too. L Brands’ Bath & Body Works chain, while not as sexy as its flashy corporate sibling Victoria’s Secret, has quietly churned out earnings during the pandemic that exceeded even the company’s own optimistic forecasts.

The even better news at Bath & Body Works is that sales for some of its products have “actually been enhanced by the pandemic, specifically soaps and sanitizers and to a lesser extent, but still material, our home fragrance business as well, with people spending a lot more time in their homes.”

To meet the “tremendous growth” of online purchases, L Brands dramatically increased its delivery fulfillment capacity in 2020, Meslow says, “to the point where in third quarter, we were able to be looking at about two and a half times the amount of capacity that we had last year.”

The surprise? L Brands’ previous signature enterprise, Victoria’s Secret, showed “a pretty remarkable recovery” in its profit margins, says Mark Altschwager, an analyst at Baird.

Only a year before, Victoria’s Secret had seemed in danger of pulling down the whole company. Digital disruptions, an outdated brand image, reports of a misogynistic work culture and Wexner’s connections to money manager and sex predator Jeffrey Epstein led to demands by Wall Street investors for Wexner to retire and for L Brands to sell off Victoria’s Secret.

By the fall of 2020, however, it appeared Victoria’s Secret was “well on the way to break even,” Altschwager says. If those sales trends continue into 2021, “the brand would seem to be nicely profitable again.”

The revival of Victoria’s Secret doesn’t surprise Peterson.

“Don’t forget they’re still market leaders, the kings of intimate apparel. I really don’t see them evaporating. More than anybody (during the pandemic year), the two L Brands commodities have a good chance of recovery.”

Meslow shrugs off the drama, saying, “Customers have noticed the changes that we’ve made in our merchandise assortments and marketing and are responding positively.” The planned sale of Victoria’s Secret will happen in 2021, he says, although neither he nor any other L Brands official will say exactly what form the deal will take—whether it’s a public offering, a sale to private equity or something else L Brands financial advisers dream up.

Regardless of what happens, the year of the pandemic has left a mark.

“I do believe that some of what we’ve experienced so far this year is probably here to stay in terms of how customers behave,” Meslow says. “Some of the growth and movement to the (online) direct channel I think has been an acceleration of a multi-year trend that we had already been observing.”

And there’s one more wrinkle to the story, Peterson adds.

“The thing that’s different about all this is that there’s definitely a light at the end of the tunnel. After 9/11 and the Great Recession, we really didn’t know how long the economy would be in the tank.

“But we’re pretty sure that by next Thanksgiving, we could be beyond this.”

Tim Feran is a freelance writer.

Ascena Retail Group includes Ann Taylor, LOFT, Lou & Grey, Lane Bryant, Cacique and Justice.

Columbus region retailers

Ascena Retail Group

Business: Women’s fashion, shoes, accessories (Ann Taylor, LOFT, and Lou & Grey), women’s plus-size fashion (Lane Bryant and Cacique) and children’s fashion (Justice)

CEO: Gary Muto

Employees: 13,000

2019 total revenue: $5.5 b

2019 loss: $661.4 m 

2019 revenue through February: $1.3 b

2020 revenue through February: $1.2 b

2019 loss through February: $71.5 m

2020 loss through February: $97.4 m

Abercrombie & Fitch 

Business: Specialty fashion retail

CEO: Fran Horowitz

Employees: 44,000

2019 total revenue: $3.6 b

2019 profit: $45 m

2019 total revenue through q3: $2.4 b

2020 total revenue through q3: $2 b

2019 loss through q3: $40.2 m

2020 loss through q3: $194.2 m  

Big Lots

Business: Discount and closeout retail

CEO: Bruce Thorn

Employees: 34,000

2019 total revenue: $5.3 b

2019 profit: $242.5 m

2019 total revenue through q3: $3.7 b

2020 total revenue through q3: $4.5 b

2019 profit through q3: $148.7 m

2020 profit through q3: $531.2 m

Designer Brands/DSW

Business: Footwear and accessories retail

CEO: Roger Rawlins

Employees: 15,800

2019 total revenue: $3.5 b

2019 profit: $94.5 m

2019 total revenue through q3: $2.7 b

2020 total revenue through q3: $1.6 b

2019 profit through q3: $273.3 m

2020 profit through q3: $165.7 m


Business: Specialty fashion retail

CEO: Tim Baxter

Employees: 14,000

2019 total revenue: $2 b

2019 loss: $164.4 m

2019 total revenue through q3: $1.4 b

2020 total revenue through q3: $778 m

2019 loss through q3: $22.7 m

2020 loss through q3: $352 m

L Brands

Business: Home fragrance (Bath & Body Works) and lingerie (Victoria’s Secret) retailer

CEO: Andrew Meslow

Employees: 94,400

2019 total revenue: $12.9 b

2019 loss: $366.4 m

2019 total revenue through q3: $8.2 b

2020 total revenue through q3: $7 b

2019 loss through q3: $174 m

2020 loss through q3: $158 m


Express store at Easton Town Center