This Week in Retail #62
Hey Friends,
Big news coming out of the retail theft world this week……The retail theft “queenpin” was caught - well sort of - a retail crime “queenpin” was caught. Michelle Mack, the leader of a nationwide retail theft ring targeting Ulta Beauty and other retailers, has been sentenced to over five years in California state prison, with her term delayed until her husband's release to care for their children. Her husband, Kenneth, received the same sentence but will serve one year in prison followed by probation and community service. The couple must pay $3 million in restitution to Ulta and $13,000 to Sephora.
Mack operated the scheme from her luxury mansion in Bonsall, California, overseeing a network that stole millions in merchandise, reselling it on Amazon under the “Online Makeup Store.” Since 2012, her operation generated $8 million in sales, with $1.89 million earned in 2022 alone, until the storefront was shut down after her arrest in December.
The couple pled guilty to charges including organized retail theft and conspiracy. Seven other group members face related charges, with one already sentenced to over three years. The operation highlights the significant financial and human impact of organized retail crime, as noted by Ulta Beauty's CEO.
It’s no secret that retail media networks are dictating the strategy of major retailer's’ partnerships over the coming years. We hear the success stories of Amazon and Walmart, but Walgreens has made headlines with a strategy that has been deemed a “fiasco”. Walgreens entered a 10-year contract with Cooler Screens in 2019 to replace traditional freezer doors with high-tech digital screens for product monitoring and targeted advertising. However, the partnership has devolved into a legal battle over contract termination and technical failures.
Unreliable Measurement: Cooler Screens’ claims of 100 million monthly impressions were undermined by inaccurate data from sensors, which often miscounted due to shadows, employee movements, and abandoned carts.
Outdated Infrastructure: Power surges in Walgreens’ aging stores caused screen malfunctions, frustrating shoppers and making it difficult to maintain operations.
Technology Failures: Internal cameras and displays frequently malfunctioned, misaligning product images with cooler contents and further disrupting the shopping experience.
Partnership Challenges: Cooler Screens’ decision to cut data feeds in over 100 stores during a legal dispute negatively impacted Walgreens’ holiday sales and underscored the risks of misaligned partnerships.
In response to President Donald Trump's recent executive order prohibiting diversity, equity, inclusion, and accessibility (DEIA) programs among federal contractors, several major U.S. retailers have announced significant changes to their DEI initiatives.
Target Corporation has decided to terminate its DEI policies, marking a major policy shift for the company known for supporting LGBTQ and minority rights. The company will complete its current three-year DEI goals and stop reporting to the Human Rights Campaign's Corporate Equality Index. Additionally, Target will discontinue a program aimed at stocking more products from Black- and minority-owned businesses. Like Target, other major companies have similarly retracted their DEI initiatives. Target's decision follows President Trump's recent executive order to cease DEI mandates across the federal government, promoting merit-based policies instead.
Similarly, Walmart has scaled back its DEI efforts, aligning with the new federal directives. The company has re-evaluated its diversity-related programs and partnerships to ensure compliance with the executive order.
In contrast, some companies, like Costco, are choosing to maintain their DEI commitments. This move comes as President Trump orders an end to federal DEI practices and investigates corporate compliance.
Costco is facing challenges on two fronts: stalled union negotiations and shareholder scrutiny over its diversity, equity, and inclusion (DEI) practices. Around 18,000 unionized Teamsters employees, out of Costco’s 333,000 global workforce, have authorized a potential strike if a new contract isn’t reached by January 31. Workers are seeking higher wages, improved retirement benefits, and better communication channels, arguing that their demands align with the company's financial success. Costco reported $254 billion in revenue for fiscal 2024, a 5.9% increase, and $7.367 billion in net income, up from $6.292 billion the prior year.
Meanwhile, a shareholder proposal for auditing Costco's DEI practices was overwhelmingly rejected, despite growing online discourse. Teamsters rallied outside Costco's Issaquah, Washington, headquarters during a shareholder meeting, emphasizing worker concerns.
Despite these issues, experts believe Costco’s strong reputation and low-profile approach, such as addressing disputes via official SEC filings, will limit customer fallout. Costco’s stock remains robust, nearing $1,000 per share, with significant growth in e-commerce sales (16.2% year-over-year).
It’s the time of the year where we talk about the year ahead in terms of store closures. Many analysts are using the word “apocalypse” and some even predicting store closures to surpass 15,000 in 2025. Here’s what we know so far:
According to Coresight Research, U.S. store closures hit a post-pandemic high of 7,325 in 2024, with 2025 projected to see even more. Key drivers include bankruptcies, with 51 recorded in 2024, and the rise of major players like Amazon, Costco, and Walmart capturing more consumer dollars. Party City, Big Lots, and Walgreens lead 2025 closures so far, with Macy’s continuing its gradual downsizing.
While overall consumer spending remains strong, smaller chains and specialty retailers, including The Container Store and Joann, have struggled. Competitive pressures, not declining demand, are behind the closures, as retailers adapt to changing preferences or liquidate under financial strain. Retail employment has remained steady despite the challenges.
Clothing, footwear, and jewelry experienced notable growth. Visa reported a 5% increase in apparel and accessories spending, while Mastercard recorded a 3.6% rise, with online sales climbing 6.7%. Adobe highlighted a nearly 10% surge in online clothing sales, driven by discounts averaging over 23%, totaling $45.6 billion in holiday e-commerce.
The shift back to in-office work is a key driver, with employers like Amazon and JPMorgan implementing stricter return-to-office mandates. Stylist Avri Lauren noted growing demand for workwear as many employees seek to rebuild their wardrobe with sustainable, versatile staples from brands like Everlane and Reformation. Retail analyst Jane Hali observed that brands are adjusting to the "surge in need of replacement" garments by promoting multi-purpose items.
Speaking of back to office…..Walmart's new Home Office campus in Bentonville, Arkansas, spans approximately 350 acres and features over 30 buildings, including office spaces, amenities, and parking structures. The campus is designed to foster collaboration and innovation among approximately 15,000 associates. The design emphasizes sustainability, utilizing regionally sourced mass timber construction, energy-efficient systems, and over 13 acres of lakes for stormwater management and irrigation. The campus integrates biking and walking trails, connecting seamlessly with the greater Bentonville community.
Amenities include the Walton Family Whole Health & Fitness center, offering comprehensive health and wellness services, and the Little Squiggles Children's Enrichment Center, providing childcare and early childhood education for associates.
Additionally, the campus features Sam Walton Hall, a 200,000-square-foot building with a two-story, 1,500-seat auditorium for events and gatherings.
The new Home Office officially opened in January 2025, with the first merchandising team transitioning to the campus. The move is part of Walmart's strategy to create a more connected and efficient workspace, accommodating a digitally native workforce and encouraging collaboration.
ASOS, the British fast-fashion and cosmetic retailer, has announced it will "mothball" its Atlanta distribution center and serve US customers primarily from its automated UK facility in Barnsley, supplemented by a smaller US site.
ASOS emphasizes this move is not a retreat from the US market, which remains a core focus. The new distribution model aims to enhance customer experience with broader product offerings, faster delivery, and lower fulfillment costs. ASOS also plans to launch a "Partner Fulfils" program in the US, enabling brands to ship directly to customers.
The decision aligns with ASOS's success in reducing stock levels by 50% and transforming the US into a profitable market in FY24. The company expects £10-£20 million in annualized EBITDA benefits from FY26, alongside free cash flow and working capital improvements. While FY25 EBITDA impact will be neutral, £190 million in adjusting items, primarily from asset impairments, will affect reported profits.
Quince on the other hand is expanding into new ventures……I’m a big fan of the Quince approach to affordable luxury, focusing on premium materials and a highly executed supply chain to keep costs low. Quince is now expanding into fragrance, wellness and other lifestyle categories to broaden its appeal. Starting this week, it will offer collagen powder and electrolyte packs, with plans to introduce vitamins, supplements, perfumes, men’s footwear, lighting, and outdoor furniture in 2025. These products will adhere to Quince’s model of sourcing directly from manufacturers to keep prices low.
Quince’s expansion builds on prior moves into non-apparel categories, including cookware, bedding, and candles. The brand aims to become a go-to source for high-quality, cost-effective essentials across home, work, and outdoor living. Founded in 2018, Quince launched officially in 2020 and saw annual sales of $300 million in 2023, targeting $1 billion in 2024.
The company remains cautious, producing items in small batches to reduce waste and relying on customer feedback to refine its offerings. By focusing on high-ticket items like wellness products and fragrance, Quince plans to deliver premium quality at 40%-50% lower prices, appealing to value-conscious consumers seeking “quiet luxury.”
And to wrap up this week…….Is the Container Store rising from the ashes liek a phoenix? A U.S. bankruptcy judge has approved the Container Store's restructuring plan, allowing the retailer to reduce its debt by $88 million. Despite objections from the U.S. Justice Department's bankruptcy watchdog, the judge ruled in favor of the deal, citing creditor consent.
The Container Store, which filed for bankruptcy in December, will emerge as a private company owned by lenders, including Golub Capital and Glendon Capital Management. The restructuring, which won't affect store operations or customer experience, includes $40 million in new funding from lenders. The company plans to complete its restructuring and exit bankruptcy early next week.
That’s all folks…….Have a great week!