6 retail brands ready for a comeback in 2024

Gap Inc. has struggled for several years since mall traffic declined and sales slumped. The namesake Gap brand's total Q3 sales of $887 million were down 15% compared to last year.

Today, the company is chartering a path to revamp its brands under a new CEO, Richard Dickson, who came from Mattel after a successful makeover of the Barbie brand.

"The tone of the company has changed from one that was in denial about the issues to one that understands the problems and is trying to inject more energy and excitement into the offer," Saunders wrote. "Richard Dickson is integral to the changes being made. He is an outsider who has brought a breath of fresh air to a tired company."

"Gap, to me, is an obvious brand that feels like it's ready for this sort of moment," Briggs said. "They're in that same lane as many of the brands that we've seen have successful reinventions in the past."

Briggs suggested two ways Gap could position its basics: by upping the quality to become a mid- to upper-tier brand, or by selling dupes of more expensive brands like Anthropologie and Free People.

"Their runway for reinvention is really quite large because they're known right now for their simple basics," she said.

Victoria's Secret has struggled to capture young shoppers' attention as their values have shifted away from its ultra-sexy beauty standards, and the lingerie market now has far more players. Victoria's Secret and Co. reported Q3 net sales of $1.2 billion, down 4% compared to the same quarter last year.

"They're still working through some brand identity kinks," Briggs said. "They're in a precarious position, because they were known for one thing for a long time that was successful. Americans' values have shifted."

"They're continuing to work to enhance the meaning of their brand, to continue to capture and return to the wider audience that they had, who they were, the destination," Telsey said. "There's been increased competition and there's more work for them to do to continue to gain a benefit."

After its efforts for more inclusive marketing backfired, Victoria's Secret brought back supermodels and its fashion show. Both efforts have helped the fashion retailer regain relevance among young shoppers. The brand ranked as the 20th fastest-growing brand among Gen Z in a Morning Consult report.

"They're trying to strike the right balance of being authentically inclusionary, and while also still not throwing out their total version of sexy or womanhood that they sold for so many years," Briggs said. "If they do become a massive brand in 2024, I think it'll be a really great case study."

Bath & Body Works saw sales soar in 2020, when hand sanitizers and candles were in high demand.

This year, the company's net sales in Q3 were $1.56 billion, down 3% from last year. Bath & Body Works expects Q4 sales to decline as much as 5% because of decreased consumer spending and post-pandemic normalization.

Bath & Body Works ranked as the top fragrance brand among all female teens in a semi-annual Piper Sandler survey.

Halloween sales grew 5% in the third quarter. Along with successful seasonal offerings, the company has had initial success expanding into new categories like men's products, fragrance, hair care, and laundry, and expanding its lip collection.

Since Bath & Body Works launched its loyalty program in 2022, nearly 41 million customers have joined.

"Loyalty sales represent approximately three-quarters of our US sales since the national launch," CEO Gina Boswell told investors in a November earnings call.

"One of the things that's so interesting with Bath & Body Works is the loyalty that they have," Telsey said. "That's very impressive when you think about the margin potential that they have," she said.

Of the Gap Inc. brands, Old Navy has seen the first signs of a comeback, with its first positive comparable sales in more than two years. Comps were up 1%, with strength in women's, kids, and baby categories during the back-to-school season.

"There's still work to be done," Telsey said, "but definitely the improvement that you saw with strength in women's, kids, and baby at Old Navy in the most recent quarter and an acceleration in the active category was encouraging in my mind for Old Navy."

According to Telsey, the company could benefit from consumers who are trading down, or swapping expensive brands for lower-end ones. "It's about continuing to work to get the product right and to engage with that core customer," she said.

The Rack brand seems to be a bright spot within Nordstrom. Total company net sales in Q3 decreased 6.8% compared to last year, while Nordstrom Rack net sales decreased 1.8%.

Rack stores have been the company's largest source of new customer acquisition, and the Rack digital store is now profitable, CEO Erik Nordstrom told investors in a November earnings call.

"The Rack digital channel is now profitable on a year-to-date basis, and we expect it to continue to be profitable for the full year," Nordstrom said.

"Nordstrom Rack has been a chronic underperformer for the past few years," Saunders wrote. "However, management is now improving the offer by increasing the number of brands available and the quality of products."

"Although we are in the early stages of reinvention, there are some initial signs that this is improving customer interest and conversion," Saunders wrote.

Off-price retailers have benefited from current economic concerns as cash-strapped shoppers are more inclined to look for deals. The Rack could also benefit from this shift.

Foot Locker recently exceeded sales expectations and is investing in more styles to appeal to sneaker lovers. The company reported sales of $1.99 billion, down 8.6% compared to last year.

Early this year, Foot Locker announced plans to close 400 mall stores as it shifted its focus to niche shops for sneakerheads, kids, and higher-income shoppers. The company also renewed its partnership with Nike, expecting Nike sales to reach between 55% and 60% of total revenue by 2026, according to an investor presentation.

"Foot Locker is trying to make itself more of a destination for sneaker enthusiasts as part of what it calls its Lace Up plan," Saunders said.

"This has some sensible elements, such as boosting sales from brands other than Nike, including the introduction of newer and popular labels like On and Hoka," he continued. "These are available at many Foot Locker stores and are helping to widen the customer base."