(Image Source: CNBC)
At the recent virtual ICR conference, several retailers raised the issues of denting sales and understaffing at distribution centers. While businesses are blaming the new wave of Omicron variants for these challenges, investors seem to be shrugging them off.
Indeed, the latest surge of cases in the US has raised plenty of uncertainties for the retail sector. Lululemon, for one, barely met the holiday sales expectations due to shorter opening hours and labor constraints. Lands’ End also encountered a similar problem whereas Albercrombie & Fitch did not have sufficient inventory to meet consumer demand.
In order to deal with the labor shortage, each retailer has adopted a different approach. While Lands’ End requested their staff to work extra hours, Abercrombie & Fitch chose to optimize staff distribution across their brands. “In a mall where we have several brands and we have a staffing issue because we have one store perhaps that gets caught up with Covid, we can borrow staff from the other stores and that has helped us out tremendously,” said Fran Horowitz, Chief Executive of Abercrombie.
Telsey Advisory Group’s Chief Research Officer, Dana Telsey, believes that the Omicron variant will continue to have an adverse effect on sales and staffing for a while longer. In American Eagle’s case, they agree with the investors that the negative impact of COVID will only be temporary. “We think it will be short term, if there is any impact, and more isolated in January … maybe into February,” said American Eagle Chief Financial Officer Mike Mathias.