Dressing down: Pandemic hits to the clothing industry shaping up to be a fashion disaster

From the sweatpants style of the new work-from-home army to an oversupply of last season's looks, the COVID-19 pandemic is shaping up to be a fashion disaster for one of the largest industries in the world.

The first ripples of trouble are already being seen. Army & Navy is closing its department store chain after more than a century in business, Reitmans Canada has warned it could fail without financial help, and international chains like J. Crew, Neiman Marcus and Aldo have all filed for bankruptcy protection.

But retail is only the tip of anindustrythat extends to fashion designers, apparel manufacturers, textile producers and even agricultural operations, says Lori Moran, a recently retired University of Alberta professor who was assistant chair of the human ecology department.

"The industry really is facing dire consequences, not just for retailers but for all the people who produced those products that fashion retailers sell," Moran told CBC Radio's Edmonton AM this week.

"There are millions of workers not having their jobs, factories that won't be open. There aremajor losses occurring for one of the world's biggest industries. And fashion retail is really just part of that."

Retailers feel it first

But retail isthe first domino in the industry chain; it sends others toppling.

The Aprilcoronavirus update of The State of Fashion 2020, an analysis byconsulting firm McKinsey & Company, warned thatabout 80 per cent of publicly listed fashion companies in Europe and North America would be in financial distress if stores remained closed for two months.

Theindustry was generating $2.5 trillion in global annual revenues before the pandemic hit, McKinsey & Company noted, but had already seen declines and was braced for a tough 2020.

"A lot of Canadian retailers were already in trouble before COVID hit," Moran said, citing stiff competition and decreased traffic in some large department stories. "The COVID crisis has just really kind of made things worse for some of these companies."

With most Canadian pandemic-related closures beginning in mid-March, the industry is now reaching that two-month mark.

Heading the pack of retailers in financial jeopardy are ones that didn't or still don't have the ability to conduct sales through e-commerce, Moran said.

"If companies didn't have an online business established already to try and offset some of that lost business, they are in trouble. So you might see some companies scrambling to get that in place," she said.

Indeed, there has been a surge in business for Ottawa-based Shopify, which creates e-commerce platforms for businesses. Last week, Shopifysurpassed the Royal Bank of Canada as the most valuable company in the country.

Too much supply, not enough demand

The crux of the fashion problem comes down to the classic economic principleof supply and demand.

"We are seeing people changing their habits a little bit in terms of demand," Moran said. "We've been working at home longer. There's been obviously a trend to more comfortable clothing so switching up workwear for sweatpants, maybe even pyjamas in some cases."

Moran suggested that companies selling "athleisure" wear, such as Vancouver-based Lululemon, are likelystill doing well.

In March, Lululemoncitedthe uncertainty of COVID-19 in its refusal to offer a financialoutlook for 2020.

On the supply side, many retailers find themselves with a glut of stock, ordered months in advance,that they are now having trouble selling and, in some cases, storing.

"When times are tight, a lot of off-price retailers, you know, places like Winners, for example... would take a lot of that stock that retailers weren't able to sell," Moran said.

"But there is so much of it now, and there is so much discounting going on everywhere I don't think they can absorb everything that's out there. It's going to be a big problem."

Finances also crimping our style

This week, Alberta started the first phase of its reopening strategy, allowing retailers and shopping malls to open doors with an abundance of caution and careful rules to enforce physical distancing and prevent the spread of the novelcoronavirus.

West Edmonton Mall, for example, will be limiting crowds to about 30 to 50 per cent of normal occupancy.

The mall's general manager, Danielle Woo, told Edmonton AM that she expects to see shoppers returning by the weekend. "Everybody needs a little bit of retail therapy after the past few weeks," she said.

But Moran notedthat not everyone is in a financial position to afford a shopping trip, no matter how deep the discount.

"Fashion is an industry that is hugely dependent on discretionary spending," she said.

"Even if there are some good bargains out there, when consumers are cash-strapped and they're not working, fashion shopping kind of goes to the bottom of the list."