Forever 21 Means Business
Rachel is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Good investing and good decision-making in general is about knowing when to pull the trigger and when to hold off. Since 1984, Forever 21, a women's fashion company, has made all the right moves and is reaping the rewards of the patience they have demonstrated. The fashion industry is tough. It's cut-throat, grinding, and heartless.
Right now, Forever 21 is a privately held company that is taking over what once was a highly diversified retail space, targeting women in their teens and twenties. Fashion brands including Guess (NYSE: GES) and Limited (NYSE: LTD), are experiencing a slow death as Forever 21 has steadily increased its customer base.
So much of shopping is online now, and if a brand is unable to evolve and keep up with the shifts in the way people are shopping, their end is near. Forever 21's website is both aesthetically pleasing and user friendly. The online shopping experience with Guess and Limited on the other hand leaves much to be desired. They have tremendous room to improve in the area of online marketing. It might be a budget problem, or an oversight on the corporate level, but this is something that if overlooked for much longer will make for a quick death. Online marketing and having a user friendly online store is the lifeblood of retail. For every customer that sets foot in a physical retail business location, it is crucial that the potential or current customer's email address is captured.
Good Timing and Patience
In 2009, Forever 21 was in the right place at the right time and the Mervyns company was going bankrupt. They bought up the Mervyns department store leases on the cheap, taking over 15 locations. Later that year they continued to fill the department store spaces of former Gottschalks locations and landed the prime real estate space of the Virgin Records Megastore in Times Square, New York. Getting themselves into this position took patience.
Growing a clothing line takes even more patience. Forever 21 started out with one clothing line for women ages 16-25 and over the last 28 years have slowly added lines for men, kids, and plus sizes. Again, knowing when to pull the trigger on new merchandise and when to wait. It happens all the time, especially in the fashion industry. People get excited and trigger happy and want so badly for the business to take off overnight and it all falls apart. Slow and steady wins the race.
For the fashion industry, it should not come as a surprise that Forever 21 is expanding and taking over this retail space. Forever 21 didn't rush to become a $4.5 billion company. Their slow growth business model combined with a fair amount of creative branding has helped them to not only survive the poor economic climate, but to thrive.
The Bottom Line
In my opinion, Forever 21 has proven their business model. Two international brands, Zara and H&M, have come overseas to the United States to compete for some of the action. To shareholders of Guess and Limited, I would say sell. Unless these companies scale back, prioritize, and re-brand I am guessing they are limited...
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