Growth plans with specific revenue goals are a good way to instill confidence in investors, but it’s increasingly hard to predict how the market will react over a longer period. Don’t forget to subscribe to the Glossy Podcast for interviews with fashion industry leaders and Week in Review episodes, and the Glossy Beauty Podcast for interviews from the beauty industry. –Danny Parisi, sr. fashion reporter
The growth projections from some of fashion’s biggest brands
Last week, American Eagle Outfitters, the parent company of American Eagle and Aerie, among other brands, announced a new three-year growth plan. Like many growth plans, it’s ambitious, promising 3-5% annual revenue growth per year and a 10% increase in profit margins over the next three years.
The company’s fourth-quarter earnings, which showed 4% revenue growth, suggest that the company is on the right track, but predicting revenue growth over even one year, let alone three, has recently proven a difficult task for many publicly traded fashion brands. Earnings reports from the last week showed how some of the biggest companies in fashion are faring in their growth and revenue goals.
For example, Victoria’s Secret’s earnings revealed that its efforts to rebrand have not paid off. It expects $6 billion in revenue this year, down almost $200 million from 2023. Victoria’s Secret leadership had expected efforts like upping its investment in swimwear and relaunching its fashion show to increase customer acquisition and retention, making up for lost market cachet.
Gap also adjusted its sales expectation last week, to a flat $14 billion. That would put its revenue on par with last year’s and below analysts’ expected sales. The last few quarters have seen Gap taking hits to its revenue thanks, in part, to declining sales at Banana Republic and Athleta. But the last quarter saw a 2% bump in Old Navy’s revenue, suggesting that it and the Gap brand, which grew 4%, will be the company’s main growth drivers this year.
Meanwhile, Lululemon has stayed relatively on track, in terms of its own growth plan, which it calls Power of Three x2. The plan, announced in 2022, aimed to double the company’s 2021 revenue of $6.25 billion to $12.5 billion by 2026. As reported last week, its revenue for the fourth quarter of 2023 showed a 15% increase from a year prior, to over $3 billion. That put Lululemon significantly closer to its goal of $12.5 billion per year. The company’s leaders reiterated their belief that the company will reach its 2026 goal.
It’s increasingly tough to predict revenue goals, particularly as the industry sees continued disruption from mass layoffs and inflation, among other factors. The luxury sector, for example, seemed caught off guard by the drop in luxury spending by the end of last year, leading to surprise deals like the sales of Farfetch and Matches Fashion.
