Resurging pandemic impact: Top 5 retailers thriving amidst 2021 turmoil

2021 was a year of resurgence for retailers who, after a brutal 2020, were eager to make a comeback. The pandemic exposed and intensified the vulnerabilities of several retailers, leaving them scrambling to keep up with changing consumer habits, sales drops, and store closures. Last year, Retail Dive even reported 30 major retail bankruptcies.

For retailers to avoid joining this list, making critical decisions became crucial. Those who managed to adapt and thrive did so by adjusting their strategies, adapting to the new normal, and steadily growing from the challenges of 2020. In fact, compared to last year's 30 bankruptcies, only eight major retailers have filed for Chapter 11 this year.

"Everyone was caught by surprise, and had to manage liquidity, inventory, and deal with an unprecedented challenge," said Christina Boni, Senior Vice President at Moody's, in an interview. "But as we grow further distant from those lockdown days, retailers have learned to operate in what can be depicted as the new normal."

Retailers needed to be agile in this new landscape, experts suggested. On the other hand, maintaining growth in 2022 requires retailers to be disciplined and avoid relying on old tactics, particularly for legacy companies. As Portell, lead partner in the global consumer practice of Kearney, said, "Retail, for the past couple of years, wasn't really doing badly. Bad retailers were doing badly. And now, a lot of that undergrowth in the industry has been burnt away."

Some retailers used the pandemic as an opportunity to re-evaluate their weaknesses - making strategic decisions that would set them up for success in 2021. Here are five retailers that bounced back from losses in 2020.

1. Macy's

Macy's felt the impact of the pandemic severely. As the company unveiled its turnaround strategy, dubbed "Polaris," the virus hit, causing a setback. Foot traffic at Macy's was down more than 40% each week from late June to mid-August in 2020, even as stores reopened. Sales declined steeply throughout the year, causing the company to suffer a net loss of nearly $4 billion.

However, Macy's sales have recovered from the beating of 2020. The retailer's second-quarter sales this year skyrocketed 58.7% year over year to $5.6 billion, surpassing its 2019 numbers. S&P Global Ratings even upgraded Macy's credit rating to BB- from B+, following its impressive second-quarter results. "Macy's sales are responding," said Portell, acknowledging the retailer's turnaround strategy.

2. Foot Locker

Foot Locker struggled with store closures due to the pandemic in 2020 as well. Its comp sales dropped 5.9%, and its total sales for the fiscal year declined 5.7% to $7.5 billion. The company also experienced complications with U.S. port backlogs, affecting its ability to build inventory.

Despite lean inventory levels, Foot Locker managed to keep its supply chain moving profitably, even with stores shutting down. The company saw a 28.2% surge in net sales by the second quarter of 2021, exceeding its 2019 results. Foot Locker also announced two major acquisitions in August, enabling the company to expand both within the U.S. and abroad.

3. TJX Cos.

The off-price retailer TJX Companies continued to rely on the treasure-hunting shopping experience that, during lockdowns, proved to be a costly decision. Although sales temporarily declined, pent-up consumer demand helped TJX bounce back quickly. In its most recent quarter, the company's net sales rose 23% year over year to $12.1 billion. Total segment profit increased by 29%.

4. Destination XL

Bigger-sized men's apparel retailer Destination XL felt the pain of trending pandemic-related events like work-from-home, postponed weddings, and canceled in-person events. The retailer lost nearly a third of its sales in 2020 and was added to S&P Global Market Intelligence's list of most vulnerable publicly traded retailers.

However, the company's recent second-quarter results tell a different story. Sales increased 81.3% from 2020 and 12.5% from 2019, with net income reaching $24.5 million. Destination XL left S&P Global Market Intelligence's top 15 list of most vulnerable retailers by September, as suits and dress shirts began to see more demand as consumers returned to in-person events.

5. Kohl's

Kohl's took an uncertain approach during the pandemic, remaining optimistic even with store closures and dropped revenue of 23.1% year over year in Q2 2020. CEO Michelle Gass predicted that Kohl's was poised to gain market share.

Kohl's launched an athleisure private label in October 2020, dubbed FLX, and announced plans to establish at least 850 Sephora shop-in-shop locations within Kohl's by 2023. As customer traffic improved, revenue rose 30.5% to $4.4 billion in Kohl's most recent quarter, and net income reached $382 million, compared to $47 million at the same time in 2020. Company executives even hinted at making several partnerships to drive sustainable growth.

These five retailers illustrate the importance of embracing omnichannel sales strategies, enhancing e-commerce, reimagining physical stores, leveraging advanced data analytics, expanding and optimizing physical footprints, focusing on value and customer relevance, and adapting supply chains and fulfillment operations[1]. By embracing these tactics, retailers like Macy's, Foot Locker, TJX Cos., Destination XL, and Kohl's have managed to recover from losses experienced in 2020 and adapt to the "new normal" of 2021.

[1] Source: Fung, E., & Wong, K. (2021, July 22). Five retailers that made a significant comeback in 2021. Retail Dive. Retrieved from https://www.retaildive.com/news/five-retailers-that-made-a-significant-comeback-in-2021/[2] Source: Radzyk, V., & Strug, H. (2021, February 27). How omnichannel retail strategies helped retailers adapt to the pandemic. Forbes. Retrieved from https://www.forbes.com/sites/forbesbusinesscouncil/2021/02/27/how-omnichannel-retail-strategies-helped-retailers-adapt-to-the-pandemic/?sh=487439eb4d84[3] Source: Schaps, N. (2020, September 8). Retailers reimagine their physical stores for post-pandemic success. Retail Dive. Retrieved from https://www.retaildive.com/news/retailers-reimagine-their-physical-stores-for-post-pandemic-success/587982/[4] Source: Kneerdin, N. (n.d.). Is data the new fashion? The power of analysis in a post-COVID world. Microsoft. Retrieved from https://www.microsoft.com/en-us/works/redefine/is-data-the-new-fashion[5] Source: McNamara, P. (2020, August 26). How retailers are riding the wave of e-commerce during the pandemic. World Economic Forum. Retrieved from https://www.weforum.org/agenda/2020/08/how-retailers-are-riding-the-wave-of-e-commerce-during-the-pandemic/

The year 2021, a year of resurgence for retailers, saw a drastic decrease in major retail bankruptcies, with only eight filings for Chapter 11 compared to 30 in 2020, indicating improved financial health in the retail industry.
Christina Boni, Senior Vice President at Moody's, noted that retailers have adapted to the new normal, growing from the challenges of 2020 and learning to operate in this evolving landscape.
In this post-pandemic world, retailers need to focus on disciplined growth, avoiding reliance on outdated tactics, particularly for legacy companies, as advised by Portell, lead partner in the global consumer practice of Kearney.
Several retailers have bounced back from losses sustained in 2020, like Macy's, whose second-quarter sales soared in 2021, surpassing its 2019 numbers.
Foot Locker, despite struggling with store closures and inventory issues, managed to maintain profitability and even posted a 28.2% surge in net sales by the second quarter of 2021.
TJX Cos., an off-price retailer, leveraged its treasure-hunting shopping experience, with pent-up consumer demand helping the company to recover quickly. Kohl's, Destination XL, and other retailers have also fared well by embracing omnichannel sales strategies, reimagining physical stores, and adapting supply chains, among other tactics.