Top 5 stories from Retail Dive

Among the many reasons why the topic of organized retail crime confuses people is that the term, also known as ORC, means different things to different stakeholders.

Some retailers in recent years have reported escalating levels of shrink, and the industry generally attributes that to rising ORC incidents. Yet there’s no consistent understanding of this specialized kind of crime among law enforcement or the industry itself, experts say. Even the researchers who spent a year working on a special report on organized retail crime for the National Retail Federation say the imprecision makes it nearly impossible to determine the scale of the problem.

Retailers have poor visibility into where their lost inventory has gone, and theft in general and ORC in particular are getting blamed, without much evidence, according to Brand Elverston, who has worked in retail asset protection for more than two decades, including at Walmart. Industry surveys don’t offer much clarity because the people filling them out perceive organized retail crime in a myriad of ways, he said by phone. Meanwhile, the same surveys have indicated for several years that overall shrink rates haven't changed much.

“ORC has never been totally defined as long as I’ve been in retail, and it raised its head probably about 2006-ish,” said Elverston, who now works as a consultant. “There needs to be an industry generally accepted term. But there isn’t one.”

Groups like the NRF and Retail Industry Leaders Association have struggled to define and quantify the issue, with mixed results. The ICSC, which represents malls, borrows from the definition employed by Homeland Security Investigations, a division of the U.S. Immigration and Customs Enforcement, also known as ICE: “the association of two or more persons engaged in illegally obtaining items of value from retail establishments, through theft and/or fraud, as part of a criminal enterprise.”

Organized retail crime “is not a singular incident, event or individual crime,” according to an email from NRF spokesperson Mary McGinty. Theft related to it includes “shoplifting, cargo or supply chain theft, burglaries, e-commerce and gift card fraud, return schemes and more,” she said, noting that it involve networks of thieves that acquire stolen goods for resale. Reporting varies, in part because sometimes what seems like simple shoplifting turns out to be part of an ORC enterprise, she also said.

“These crimes may be reported or recorded differently by retailers or law enforcement, and not until intensive and extensive investigations are conducted could be determined to be part of ORC activity,” she said.

Indeed, there isn’t a single definition of organized retail crime, among industry groups or anywhere, according to Mark Skertic, managing director at K2 Integrity, the risk advisory firm that worked with the NRF on a special report on the topic last year.

“That kind of speaks to one of the problems,” he said by phone. “There’s no agreed-upon — ‘Here’s how it happens. Here’s how we report it. Here’s what we have. What’s the difference between somebody shoplifting and somebody taking part in ORC.’ There is a difference, but I think that difference is not always really clear.”

That problem extended to the firm’s special report itself, released in April 2023. The report includes the caveat that “there is a lack of consensus among retailers, law enforcement officials and researchers on various aspects of crimes that constitute ORC.”

That lack of consensus has made measurement difficult. In December, the NRF removed a key statistic from the K2 report, after Retail Dive’s discovery that the number didn’t apply to organized retail crime, but, rather, to total industry shrink, or inventory loss. Meanwhile, a $70 billion estimate from RILA from 2019 applies to all types of theft, not just ORC, and, moreover, is dismissed by some experts as not credible.

The NRF has simply stopped estimating the financial impact of organized retail crime, telling Retail Dive that reports from its members likely reflect an undercount because many fail to recognize ORC; don’t realize that losses through their supply chain or via e-commerce are related to it; and often don’t report shoplifting, fraud or other non-violent incidents to police.

“The ability to determine, record and identify losses come down to the individual retailer’s resource capabilities and even law enforcement’s investigative resources into various channels of loss,” McGinty said. 

However, Elverston said that, on the contrary, many loss prevention experts at retailers tend to over-estimate the impact of theft in general and ORC in particular. The answers to its surveys, from which the organization extrapolates data on theft and shrink, are “educated guesses” at best, in part due to loose definitions, he said.

“When you see a video clip of a smash-and-grab, that captures everybody’s attention,” he said. “What doesn’t capture your attention is when you see two auditors in the back of a store that just discovered a multimillion dollar accounting error. When was the last time you saw anybody bragging about that online?”

The text of a Congressional bill aimed at combatting organized retail crime does cite a 2019 NRF estimate on ORC’s financial cost as “approximately $720,000 per every $1,000,000,000,” or less than one-tenth of a penny for every dollar in sales. That bill defines organized retail crime, in part, as “involving groups of individuals specifically targeting retail stores, often by using violence or threats of violence to subdue employees and shoppers while robbing stores of their most valuable and easily diverted merchandise” and elsewhere as involving the sale “of those illegally obtained goods through physical and online retail marketplaces.”

The bill also notes that two-thirds of retailers report “an increase of violence during the commission of retail theft.” It would establish an Organized Retail Crime Coordination Center under the U.S. Department of Homeland Security’s investigative arm, which could help coordinate what Skertic says is a dearth of information. NRF’s McGinty also said this aspect of the proposed legislation would help collect information from retailers and local, state and federal law enforcement agencies to improve reporting.

“When the NRF came to us and said ‘Can you help us look at this problem,’ one of the things we immediately realized is that we will never get our arms around it completely because there is no database, there’s nothing that tells me that a certain number of thefts occurred within a certain store at a certain strip mall on a certain date,” Skertic said. “We built our own internal ORC databases — we just started tracking instances — but even then, the data gets really dirty, really fast.”

Shoplifting vs organized retail crime

When asked for their definition of organized retail crime, many loss prevention experts, prosecutors and policy makers emphasize, as Skertic does, that it differs from shoplifting.

Shoplifting – that is, incidents involving one or two thieves who are not store employees – remains the most common type of theft from stores, according to an updated crime report from the Council on Criminal Justice released in January. While, like shopping, shoplifting has bounced back from the low levels of the pandemic, in most major cities it’s on a downward trend, according to CCJ.

Organized retail crime, by contrast, is defined by the NRF as “the large-scale theft of retail merchandise with the intent to resell the items for financial gain. ORC typically involves a criminal enterprise employing a group of individuals who steal large quantities of merchandise from a number of stores and a fencing operation that converts the stolen goods into cash.”

Rather than being taken for personal use, the stolen goods are often sold via online sites like Amazon, at flea markets and other venues, including other retailers, according to the NRF. The goods are not necessarily taken from stores, but may involve cargo points like trucks or the fraudulent use of credit cards, gift cards or returns, the NRF also says.

“We did not do as much on cargo theft as I would have liked, frankly, because we just didn’t have the budget or time to do it,” K2’s Skertic said. “But I think cargo theft is a huge part of this.”

The intense focus on organized retail crime has extended to law enforcement, which in some cases targets the higher-ups in fencing operations rather than on low-level shoplifters. In a special report on organized retail crime this month, CNBC reporters embedded with law enforcement described theft rings that netted millions of dollars for the bosses. The ORC crimes didn’t usually involve the high-profile smash-and-grab incidents often associated with organized retail crime, and most of the theft the reporters witnessed involved lower-level shoplifting, according to their report.

State laws on organized retail crime

More than 30 states have their own organized retail crime laws , according to the Organized Retail Crime Resource Center, and most if not all of them also attempt to distinguish shoplifting from organized retail crime. 

In practice, however, that distinction isn’t always made and has led to racial disparities in at least one state. In Texas, ambiguity in the penal code has led some police to arrest petty shoplifters for ORC-related crimes, according to research from Southern Methodist University, using state data. Black and Hispanic arrestees were charged for the more serious crime more than white arrestees, those researchers also found.

In Arizona, lawmakers are contemplating stiffening penalties for organized retail crime, which is already on the books. State Rep. Analise Ortiz described the existing law’s description of ORC as involving “the intent to resell or trade the merchandise for money or for other value” as “incredibly broad.”

“This could mean a mother in desperate need, who steals something with the intention to trade it for survival necessities like baby formula or diapers, could be prosecuted for ‘organized retail theft’ when she is a far cry from a sophisticated, conspiring criminal,” she said by email. “Second the [stipulation that an ORC perpetrator] ‘uses an artifice…or other article’ is also overly vague. I have heard stories of prosecutors calling a pair of jeans an ‘artifice’ to facilitate shoplifting because someone put something in their pocket.”

“Moreover, increasing the criminal penalties here will have no deterrent effect because the root cause of why someone is being driven to steal remains unaddressed,” she also said.

The lack of a consistent definition complicates the ability to distinguish shoplifting from ORC, according to Trevor Wagener, director of the research center and chief economist at the Computer & Communications Industry Association, who studies these issues. Adding to the confusion is an evolution of phrasing. Law enforcement once favored the term “organized retail theft” to differentiate it from organized crime as perpetuated by the Mafia and other such enterprises, but increasingly joins the industry in calling it “organized retail crime,” he said. That, too, is inconsistent.

“I would say that over the past decade, law enforcement and the retail industry have tended to move toward more agreement, with more law enforcement authorities increasingly treating ORC as an organized crime activity, or at least organized crime-adjacent,” he said by email. “But there is enormous variation by individual law enforcement authority/department/jurisdiction.”

Theft vs shrink

Retailers reporting to law enforcement or industry group surveys need greater clarity around not just the term “organized retail crime,” but also about their inventory losses more widely, experts say.

For example, after expanding its use of RFID technology, Macy’s recently discovered that employees — including longtime staff considered highly trustworthy — were walking off with much more unpaid-for merchandise than the department store had previously suspected.

The NRF estimates that theft by employees accounts for about a third of all shrink; organized retail crime is a subset of external theft that accounts for another third, with the scale of ORC unknown, according to the group’s most recent estimates.

But the lack of visibility into inventory at most retailers is leading them to overcount not just ORC but theft of all types, according to asset protection expert Elverston.

“I don’t buy it. Two-thirds of your losses cannot be isolated in theft in aggregate,” he said. “Now, you know, in certain isolated stores, okay. But when you roll those numbers up to a corporate level? Nah.”

In the last couple of years, retailers have shined a light on shrink and theft in part because margins were tight, according to some analysts. Already, that seems to be dimming. At Target, one of the retailers most vocal about shrink and its impact on operating margin, executives in November said shrink rates were better in the period than they had anticipated. In March, executives said the retailer had made progress throughout 2023 and that they expect shrink to be about flat this year.

Elverston expects that, as shrink rates improve at Target and elsewhere, there will be a corresponding relaxation of any effort to unearth the real causes of shrink, which he said would be best identified through widespread use of effective risk-mitigation strategies including RFID.

“Shrink is cyclical. It’s a roller coaster,” he said. “It always improves because when it gets bad enough, we focus — and guess what, no surprise, it actually gets better. And then we take our foot off the brake, and we focus on other crap. It’s Whack-a-Mole, almost. We need shrink visibility. RFID provides the intelligence that we do not have today, as in, how many went out what door at what time? Did I ever even receive it? Is it a supply chain issue or is it an in-store issue? Was it never shipped? We don’t have answers to those questions now.”

Tractor Supply is eliminating its diversity, equity and inclusion roles, withdrawing its carbon-emission goals, ending support for Pride events and voting efforts, and ceasing data-sharing with LGBTQ+ advocacy group the Human Rights Campaign.

In a statement published Thursday, the retailer said the retreat is in response to customer feedback and that it will work to “ensure our activities and giving tie directly to our business.” The company didn’t immediately respond to questions about how many roles were cut and whether the people affected will be laid off or offered other positions.

The retailer said it will “focus on rural America priorities including ag education, animal welfare, veteran causes and being a good neighbor.” But Eric Bloem, vice president of programs and corporate advocacy at the Human Rights Campaign, said that "Tractor Supply Co is turning its back on their own neighbors with this shortsighted decision.”

This year’s Pride month had been quite subdued compared to last year, when protests against Bud Light and Target swept through social media and, in Target’s case, entailed sometimes frightening altercations in stores. But as this year’s Pride month wanes, Tractor Supply has announced drastic alterations to policies affecting the LGBTQ+ community, climate change efforts and company culture.

Robby Starbuck, an activist, filmmaker and purveyor of wellness supplements, said on social media Thursday that his three-week campaign criticizing Tractor Supply for “going woke” led to the retailer’s new policies. Starbuck characterized his effort as “the single most successful boycott that we have had in our lifetimes. Period. Bar none. Bud Light doesn't come close.”

Tractor Supply didn’t immediately respond to a question about whether Starbuck’s campaign influenced its decision.

Rural areas of the country may be more diverse than many realize. As of the 2010 Census, 20% of rural dwellers were people of color, with other national surveys finding that the LGBTQ+ population is about the same as in cities, according to a 2019 report from the Movement Advancement Project. Tractor Supply CEO Hal Lawton in April told CNBC that younger people continue to move into rural America, where the company runs its stores, thanks to more affordable housing, a phenomenon that, if true, could further alter demographics.

“LGBTQ+ people live in every zip code in this country, including rural communities,” HRC’s Bloem said in an emailed statement. “We are shoppers, farmers, veterans and agriculture students. Companies from every industry work closely with us to be sure their employees and customers are respected, valued and can get the job done for their workforce and shareholders.”

Tractor Supply has previously earned high marks from the HRC Foundation for its workforce protections, inclusive benefits, internal training and inclusive culture and, to some extent, its corporate social responsibility. Bloem said the group has worked with the retailer “for years to create inclusive policies and practices.” Because the retailer has actively participated in its Corporate Equality Index, the HRC Foundation will continue to rate it each year, even if it doesn’t submit new information, per the survey’s terms and conditions. The group will base its scores on previously submitted data as well as publicly available information, a spokesperson said by email.

Tractor Supply didn’t immediately respond to questions about whether it would also reduce such benefits or cease all efforts and training around culture.

Under Armour lost its second permanent CEO in two years this March when Stephanie Linnartz stepped down. But instead of continuing the search for Kevin Plank’s replacement, who himself just relinquished the CEO role four years ago, the brand announced that its founder and then-executive chairman would once again helm the company.

Why? According to Plank’s first call back as CEO, the company wasn’t achieving its ambitions. 

“Our goal has always been to be a premium brand of choice, driven by industry-leading athletic performance products, inspirational storytelling, and elevated consumer experiences,” Plank said, according to a Seeking Alpha transcript. “Yet, we have not consistently nor holistically delivered on this ambition.”

Plank cited high turnover in the CEO spot, along with other key roles, as part of the problem. But all that turnover in the top spot is likely Plank’s doing, analysts said.

“Kevin's always had a problem handing off the reins of the company,” Matt Powell, senior adviser with BCE Consulting, said. “And the board is Kevin's board, and so if Kevin wants to make a change, the board pretty much signs off on that.”

Wedbush’s Senior Vice President of Equity Research Tom Nikic agreed, saying he thinks Plank wanted to be in charge and “the idea of ceding control to somebody else just ended up not being appealing to him.”

A spokesperson from Under Armour said Plank was not available for interviews.

As the brand’s founder and CEO from 1996 to 2019, the executive has spent far longer running the company than not. And it grew to a $5 billion business under his leadership, which is nothing to scoff at in the athletics space. Still, in recent years competitors like Lululemon have surged far ahead of the athletics brand, with Lululemon almost doubling Under Armour’s revenue in 2023 (and that’s only two years after Lululemon first overtook Under Armour).

“It clearly was not meeting his expectations. You can see that from his commentary,” Powell said of Under Armour’s performance recently. “He has a vision, although I'm not sure I fully understand what that is at this point, but he has a vision for what Under Armor ought to be.”

If that vision pans out, and Under Armour sees strong growth and profits again, Plank is likely in the CEO role for the long run. If it doesn’t, then Plank’s position should be a temporary one, Powell said.

“I think it was the right thing for him to do, to step aside. And I'm very curious to see how all this is going to play out now,” Powell added, noting that finding the brand’s next CEO might be harder, if it comes to that. “I'm not sure, after what's happened with the previous CEOs, that there's going to be a lot of appetite for people to come in and take on that challenge.”

If Plank is to turn Under Armour around, it’ll take more than just willpower, analysts said. It’ll take a firmer brand identity, stronger product and something that Plank isn’t known for: patience.

“Historically, something that takes, let's say, 18 months — he's trying to do it in seven,” Sam Poser, equity analyst at Williams Trading, said. “When that happens, something gets good for a minute and then it blows itself up all over again.”

Click clack

Under Armour launched in 1996 with a sweat-wicking T-shirt, followed it up a year later with a cold-resistant shirt and hasn’t stopped focusing on performance since. An Under Armour spokesperson in July told Retail Dive the brand is “rooted in performance-driven innovation” and that this “continues to be a core focus.”

“We have developed hundreds of patents for technology through the years designed to enable athletes to perform at the top of their game,” the spokesperson said. “These technologies are at work across our footwear, apparel, and accessories.”

And the strategy worked well for a while. In the early 2000s, when Under Armour was still making revenue in the low millions, the brand was posting 100%-plus annual growth. That moderated in the years that followed, as is expected when revenue increases, but Under Armour still grew by double-digits throughout much of the 2000s and 2010s.

The company went public in 2005 and launched its first footwear in 2006. The offering, which was a pair of football cleats, captured 23% of market share in their first year, according to Under Armour. Poser still remembers the ad that went alongside those shoes, which focused on the click clack sound a pair of cleats makes when athletes walk through the tunnel and onto the field.

“They didn't really have to talk about the product. They were basically saying, ‘We get you,’” Poser said. He noted that the cleats “weren’t particularly good,” but that every football player can relate to the experience of walking through the tunnel and onto the field.

In more recent years, Under Armour has lost some of that emotional connection it once had, Poser said, and instead leaned hard into advertising the performance attributes of its products. 

And for a time, performancewear was in. About 10 years ago performancewear, which Under Armour has steadfastly stuck by for decades, was more popular than athleisure, Powell noted, with performance heritage brands “really in ascension.” It was the perfect environment for Under Armour to thrive in.

“That 2010 to 2015 timeframe — that was obviously a very strong, strong period for them,” Nikic said. “[But] there were some aspects of the business that just aren't comparable to today.”

For example, Under Armour at the time was expanding distribution in Dick’s Sporting Goods and signed Steph Curry, the latter of which Nikic likened to catching “lightning in a bottle.”

“It was almost a badass brand, right? Where you can imagine a big, tough, muscular, tough guy, would wear Under Armour stuff,” Nikic said. “There was a brand image. There was product that went behind it. There was growing distribution. So there was just a lot of stuff working — and then they just hit a wall.”

The rise of athleisure — and the fall of Under Armour

Sometime between 2016 and 2017, the Under Armour growth surge stopped. Revenue jumped 22% one year and edged up just 3% the next. Rather than an anomaly, it proved to be the new normal. Under Armour’s revenue has grown less than 5% — or declined — each year since then, except for the post-pandemic bounceback in 2021.

What went wrong to stop the tide of growth? An obvious place to point the finger is athleisure. The idea of athleticwear that can easily be adopted as everyday attire has buoyed Lululemon and others for years, but when the concept really took off in the mid 2010s, it “caught Under Armour flat-footed,” according to Nikic. The company continued to emphasize performance in the years that followed, even as growth slowed and other competitors pivoted.

Under Armour still doesn’t really have an answer for the trend, though it’s been stressing “sportstyle” more in recent quarters. Former CEO Linnartz described the category earlier this year as the “intersection of performance and style,” and the company seems to be continuing to pursue it under Plank — at least so far.

“Our vision for the future of Under Armour is to continue to innovate for our athletes who are incredibly talented and diverse, and we know what they wear on the field is as important as what they wear off the field, so we are evolving,” an Under Armour spokesperson said, noting the company relaunched a sportswear-specific Instagram channel recently. “We’re leaning into sportswear to round out our athlete innovation and provide 360 inspiration for performance wear and lifestyle attire.”

That wasn’t the only obstacle that led up to Plank’s initial departure in 2020, though. Another — potentially bigger — problem than the rise of athleisure was a series of decisions that cheapened the Under Armour brand. In pursuit of top-line growth, Under Armour went deep into the outlet business and became well-known for heavy promotions. The company also failed to segment its wholesale business properly, at one point offering the same products at Dick’s Sporting Goods and Kohl’s at different price points, according to Poser.

“They took the same product, charged a different price for it and basically short-shrifted the better customer that they had before,” Poser said. “That better customer said, ‘Why do I need to pay full price for this anymore? I’ll just go to Kohl’s if I want it.’ But then, because [Under Armour] was at Kohl’s, it lost luster as a brand.”

The lack of consumer demand for Under Armour products has also impacted how the brand’s wholesale partners treat it. Dick’s Sporting Goods used to give Under Armour more prominent placement in its stores, but has since pushed the brand to more secondary areas, Powell noted. Part of that problem is that Under Armour doesn’t resonate with teen shoppers the way other athletic brands do.

“Studies have shown that they overindex with young people and people over 35 — so essentially, the middle school kid and his dad,” Powell said, adding that Under Armour underindexes with teens, “which is, of course, where the epicenter of the sports shoe business, sports apparel business really exists. And this is something they've never really addressed. So I think things are going to continue to be a challenge until they, first of all, admit that this is a weakness — and develop a strategy to counter this trend.”

In the wake of these challenges, analysts reacted well to Plank’s announcement in 2019 that he planned to step down. Patrik Frisk, who had been chief operating officer at the company for a couple of years, was lauded as a wise choice to succeed him and did a lot to improve the company operationally. But just two years later, he was out, with many speculating he didn’t drive enough growth for Plank’s preference.

“Patrik's hire was very well received and Patrik's departure was very poorly received by the market, which kind of tells you what you need to know,” Nikic said. “I think the investment community was very excited to see what somebody else could bring to this brand. … This is a company and a brand that just needed an injection of newness — and we got it with Patrik, and then all of a sudden, we didn't have it anymore.”

What followed was an interim period under then-Chief Operating Officer Colin Browne and then, early last year, the beginning of Linnartz’s tenure. For the brief period of time she was there, Linnartz launched Under Armour’s first loyalty program and made what Powell called “necessary reductions” in payroll. She also was in the midst of a sweeping overhaul of the company’s management and talked often about the company’s need to improve product design. The company’s sales grew 3% in 2022, the year before she started, and fell 3% in 2023, the year she was there.

“I don't think you can necessarily fault Stephanie for anything operationally or fundamentally or financially that's happened at the company,” Nikic said, “because, quite frankly, she wasn't there long enough to actually do anything.”

Poser said he admired that Linnartz seemed to be taking her time with the brand rather than demanding immediate results. Under Armour didn’t comment on the reasoning behind her swift departure, besides the release they put out when she left. Each analyst Retail Dive spoke to said it was likely because Plank wanted to be in control again.

“My guess is he said, ‘Hey, I gave this a shot. I let other people run the company for about three years. I really didn't like it. I'm the controlling shareholder. I'm here for the long run now,’” Nikic said. “I would be very surprised if we saw anybody other than Kevin Plank serving as CEO of this company anytime in the foreseeable future.”

That is especially likely given how turbulent the last few years have been in Under Armour’s top spot.

Even when other people were running the company, Plank’s hand was visible throughout. As brand chief at Under Armour, it was Plank who posed for a picture with basketball star Curry to celebrate their renewed partnership in 2023, not Linnartz, who had taken over the CEO spot a month prior. And Plank has also been the brand’s executive chairman since 2020, meaning there weren’t many big decisions under Frisk, Browne or Linnartz that he wouldn’t have known about.

“I guess Kevin decided, ‘Hey, if somebody's going to stick around for four or five years, why not have it be me?’” Nikic said.

The question now is whether or not that’s a good thing.

What Under Armour actually needs

Like those before him, Plank has a plan for Under Armour’s turnaround. It includes concrete initiatives like cutting SKUs by 25% and shortening the go-to-market timeframe. But the success of Under Armour’s turnaround might rely on more nebulous concepts like improving product and brand resonance.

“I think they're facing a little bit of an identity crisis, where it's sort of like, ‘What are we known for?’” Nikic said. Initially, it was base-layer clothing like that first sweat-wicking T-shirt, a category which Plank said on the brand’s recent earnings call it would once again focus on. But what about beyond that? “That's a pretty niche product. If you're going to be a bigger player in the athletic space — which Kevin Plank and Under Armor aspires to be — you have to be something more than that.” 

Nikic recalls an investor day in 2018 when Under Armour proudly told attendees that the company still hadn’t created its defining product.

“They were kind of trying to put that forth as an opportunity. Like, ‘Hey, we've done what we've done so far without even having a defining product. Once we find our defining product, look out world! We're going to take over,’” Nikic said. “But we're sitting here now, six years later, and they still haven't found their product.”

Under Armour knows product and brand improvements need to be its focus. According to a company spokesperson, Under Armour’s top priority over the next year and a half is “to bring clarity and stability to the business” through “focusing on brand-building fundamentals, like making great products [and] telling the best story about those products.”

As for how Under Armour is going to improve product, the retailer is doubling down on innovation and developing premium performancewear. The brand tests all of its technologies in its innovation lab before they make it to market, the spokesperson said, with over 300 possible lab tests to verify quality and performance.

“Our goal is to create performance solutions our athletes never knew they needed and, once they have them, can’t imagine living without,” the spokesperson said, echoing a phrase frequently repeated by Under Armour executives on earnings calls.

But stressing the performance value and technical aspects of its products may not be the best way to sell clothes. Even performance products sell because of the emotional connection a brand makes with the customer, Poser said, and Under Armour has lost sight of that. Some of performance wear’s strongest success stories come from the appearance of the product, according to Poser, like Nike’s iconic moment in 1996 when Olympic sprinter Michael Johnson wore gold track shoes to compete. Poser also noted that Adidas’ AlphaBoost shoes were originally geared at runners, but ended up taking off as a lifestyle shoe after they were adopted more casually.

Under Armour tried several years ago to insert itself into the fashion conversation, but the efforts went nowhere, according to Nikic. The brand’s focus on “sportstyle” now could be another acknowledgment of the limits of a strict technical approach, but the brand missed the athleisure boat long ago and competition is much more intense now, according to Powell. 

And while the company acknowledges the need for off-the-field product, Plank in other ways is going back to the brand’s core. The executive in May said he would refocus the brand on men’s apparel after trying for years to develop a more robust women’s and footwear business.

“It would not surprise me if [Plank] went back to the performance roots because that's what built this brand, was really focusing on performance at a time when performance was a very important fashion story,” Powell said. “But the fashion spinner moves on its own mind and you don't force it. You have to follow it. And I think they didn't when they should have.”

As a result, Under Armour has very little resonance with teens, who are driven by fashionable styles and retro products, according to Powell. Under Armour’s athletes too, which include Jordan Spieth and Tom Brady, aren’t as relatable to younger consumers. Even Curry, one of the NBA’s most impressive players, is “sort of boring” as a personality, Poser said. Under Armour signed a new multiyear contract with the basketball star last year, but they still haven’t found a strong way to capitalize on that partnership, according to Poser.

The company has stated its intention in recent years to focus on 16- to 24-year-olds and identified that age range as its target demographic, but that’s the audience every athletics brand is focused on — and it should already have been Under Armour’s target demographic, analysts said.

“It's a good idea, but it's something they shouldn't have to say,” Poser said. “Basically, what they were saying was, ‘We've done a lousy job of this.’”

To tackle that, Under Armour has invested deeply in new hires, particularly in product and design roles. While one of Linnartz’s hires, Chief Consumer Officer Jim Dausch, is leaving since Plank’s return, Under Armour’s founder seems largely happy with the slate of executives the brand has accumulated recently. The company now has 26-year Adidas veteran Eric Liedtke to tackle brand strategy, and over the past year or so tapped John Varvatos as chief design officer, Yassine Saidi as chief product officer and Kara Trent as head of the Americas.

Plank touted on the brand’s most recent earnings call in August that the company had one of its strongest product teams to-date and was making decisions to ensure it was selling more than “just a logo” on a T-shirt. But even if better product is on the horizon, Under Armour will have to continue to fight the perception of itself as a discount brand. And that might mean fewer sales in the near term, Powell said.

“It takes great product to convince people to pay full price for it,” Powell said. “If you've educated the consumer to go one way, it takes a long time to reeducate them to go in a different way, and often it means you're going to do less business. And again, that's a big hazard for a lot of brands.”

Plank seems aware of the challenges Under Armour is facing. But he wasn’t able to overturn them before he gave up the reins in 2020 — and three other CEOs in between now and then haven’t been able to do it, either. Is there anything that makes this time different?

“I think he knows what he needs to do,” Poser said. “The question is, does he have the patience to be able to do it?”

Poser asked much the same question on the brand’s latest earnings call. At first, Plank joked that he’d just turned 52 and had been “growing and maturing” over the years. But a longer response showed more introspection on his history as a leader.

“As an entrepreneur, you always feel late. You feel like it's got to be done tomorrow. And that's something which has been somewhat of a strength — and at times it can be difficult, especially as you get large and need to scale as an organization,” Plank said. “I think really it's the maturity of just recognizing the hand that we have … I've had a pair of twos and we've had a royal flush before, and today we have neither, but we've been able to win with both.”

Walmart is partnering with marketplace StockX to offer an expanded assortment of sneakers. 

The Walmart Marketplace will be StockX’s inaugural strategic marketplace sales channel, a Walmart spokesperson confirmed to Retail Dive in an email Wednesday. Walmart said StockX’s “initial assortment is scheduled to launch on Walmart.com next week with hundreds of coveted pre-verified sneakers, including Nike Jordan 1s, Jordan 4s, Jordan 1 Travis Scotts, New Balance and Asics.”

The StockX marketplace allows buyers and sellers to make anonymous offers on shoes, apparel, electronics and collectibles. Bids are made in real time at prices that reflect current demand, the company says on its website. Shoes sold on StockX are verified new and in their original box. The partnership is set to launch on Tuesday. 

“Adding a range of coveted current culture items from StockX helps Walmart Marketplace continue its rapid acceleration by offering more items that customers want and love,” StockX said in a Thursday statement to Retail Dive. “And, Walmart’s vast customer base – many of which are new to StockX – will get to experience the platform in a way that is convenient for them. StockX sellers can also reach this built-in audience of loyal Walmart customers without sacrificing their current volumes on StockX, as products will be listed across both platforms at scale, delivering massive demand to StockX sellers.”

Walmart’s Marketplace has seen 30% growth during the last four consecutive quarters, Manish Joneja, Walmart’s senior vice president of U.S. Marketplace and Walmart fulfillment services, said during a Wednesday global retailing conference hosted by Goldman Sachs.

“The play is to get that wider assortment from all the partners, with more examples like StockX, where you see more and more brands coming on board, serving our customers, which brings a wide and deep assortment,” Joneja said, according to a conference transcript. Bringing a variety of different brands on board enables buyers to discover items that resonate with them. For sellers, the partnership offers a fair, low cost and profitable platform, Joneja said.

The StockX partnership builds on news last week that Walmart Marketplace is expanding into collectibles, along with other categories including premium beauty and secondhand items.

The retailer’s preowned marketplace, Resold at Walmart, will offer 5 million items from 1,700 sellers, while the expanded beauty offering will feature over 20 new brands in its initial assortment. The retailer’s collectibles shop will offer 0% commission through Oct. 31 for dolls, action figures, trading cards, sports memorabilia, comic books, records and musical instruments, according to an announcement. 

In an era when the department store model is under siege, two major examples of it in the U.S. — Macy’s and J.C. Penney — are pursuing very different brick-and-mortar strategies.

They do have much in common, with plans to improve stores and streamline their supply chains, indicating an abiding faith in the department store as a still-relevant retail destination. J.C. Penney last year announced a $1 billion investment in store refreshes and tech upgrades; this year, the company said it would revamp 200 stores by the end of the year and touted improvements in the speed and cost efficiency of its supply chain. And at Macy’s, newly arrived CEO Tony Spring said he would use lessons from his time leading the company’s Bloomingdale’s banner to inform the flagship chain’s transformation.

Their differences are real, however, particularly when it comes to plans for the size, number and location of their stores. Analysts peg the reasons for those differences on their current — and potential — ownership.

Dropping anchors

These two retailers have long anchored shopping centers, a setup from the mid-20th century meant to drive consumer traffic to the mall. Today, Macy’s has increasingly broken this mold, while J.C. Penney remains firmly ensconced in it.

For both its Bloomingdale’s and Macy’s banners, Macy’s Inc. has been experimenting with stores about one-fifth the size of its sprawling downtown and mall-anchor locations, placed at strip centers. Last year, Macy’s announced it would accelerate this small-format strategy by opening as many as 30 smaller stores through the fall of 2025, which would triple their number and sometimes also entail shuttering a full-line store in a given market.

Speaking at the Shoptalk conference in March, Spring said that Macy’s runs “too many locations that were built for a different era” and that it has “no choice” but to close stores if it is to prosper.

By contrast, J.C. Penney, which nearly four years ago was acquired out of bankruptcy by shopping center REITs Simon Property Group and Brookfield Properties, is maintaining its relationship to the mall. Its turnaround plan makes no mention of experimenting with small formats or entering strip malls as Macy’s has done.

“I think their plans make a lot of sense. They’ve got a great leadership team that’s leading them into the next generation of what a department store should be,” Kevin McCrain, CEO of Brookfield Properties U.S., told Retail Dive about J.C. Penney. “They are very focused and know exactly who their consumer is, and they’re looking to cater to that consumer, which is exactly what every department store should be doing.”

Open and shut

Another stark difference between Macy’s and J.C. Penney’s real estate strategies lies in how each contemplates adjustments to the sizes of their fleets. As of its most recent quarter, the Macy’s banner runs 481 full-line stores, 12 small-format stores and nine Backstage off-price stores. According to a financial report released last week, J.C. Penney runs 663 stores.

A little over a year ago, Macy’s previous CEO, Jeff Gennette, said that the closure of four full-line stores meant that the retailer was largely finished with its plan to shutter about 125 underperforming stores, part of a turnaround announced in 2020. But this year, Spring said the company would shutter another 150 stores over the next three years. Stores won’t be spared just because they turn a profit, he also said, a hard line that analysts say may be necessary in the long run.

Normally, profitability is the main driver of whether or not to run a store, unless a different location might generate even more sales or consolidation might drive efficiencies, according to GlobalData Managing Director Neil Saunders. But neither Macy’s nor Penney are in normal situations, he said by email.

“It is no secret that Macy’s has been in decline for a very long time, and it is probably the case that some locations are seeing an ongoing deterioration in sales, so in five or 10 years they may not be profitable,” Saunders said. “If Macy’s acts now it can get in front of the problem and focus its efforts on investing in the stores it thinks can carry the business forward. In some ways this is like amputating gangrenous parts of the business: it’s not very pleasant and it has arisen because of a lack of care in the past, but it is necessary for survival.”

This approach balances profitability, capital cost, operating costs and potential real estate value, making it “the right thing to do,” according to Nick Egelanian, president of retail development firm SiteWorks.

“Macy’s needs to exit stores with no future, to focus its limited resources on its most promising future investments,” he said.

The state of affairs at J.C. Penney couldn’t be more different. As part of its bankruptcy in 2020, J.C. Penney slated 144 stores for closure, but that may be the extent of its downsizing. Last week, Simon Property Group CEO David Simon told analysts that he doesn’t “anticipate much portfolio real estate activity” at J.C. Penney, citing the chain’s profitability and importance to the communities where it operates.

“I don't necessarily believe in ‘shrink to grow,’” he also said. “It's very hard to achieve.”

If anything, the retailer could benefit from expanding because even many of their low-volume stores turn a profit, at least as measured by EBITDA, he said.

“Penney is able to produce positive EBITDA even if there's not high sales,” he said. “In fact, I think Penney almost can be a beneficiary of opening new stores as opposed to closing stores.”

Both McCrain and David Simon have said that saving local jobs factored into their companies’ interest in acquiring J.C. Penney. But Egelanian is skeptical, and says that Penney should probably also put more focus on its best performers.

“What matters is shareholder value, and what determines that is a combination of profits and the hope for or path to future profits,” he said. “So JCP must focus on promising investments and exit dead-end businesses.”

Taking ownership

The contrasting real estate plays at Macy’s and J.C. Penney have everything to do with their ownership, and, in Macy’s case, potential ownership, analysts say.

Macy’s is a publicly traded company, beholden to stakeholders including investors, employees and customers; J.C. Penney has been private since being purchased out of bankruptcy four years ago by Simon Property Group and Brookfield Asset Management; since then, brand management firm Authentic Brands Group has acquired 16.7%.

“Macy's is in the retail business,” Erik Gordon, professor at the University of Michigan’s Ross School of Business, said by email. “Simon and Brookfield are in the mall business.”

However, Macy’s could soon also be a private company if one of its investors — namely real estate-minded investment firm Arkhouse Management — gets its way. Arkhouse and its financial partners have bid $6.6 billion to take over the retailer (which includes Bloomingdale’s and Bluemercury). Since Arkhouse’s overture, Macy’s has been more preoccupied with its properties, beefing up its board’s real estate expertise and announcing that property value will be a factor as it contemplates which stores to close in the next three years. 

“As Macy’s owns a lot of its shops, in some cases it might make more sense to monetize them and take the proceeds to invest in the business,” Saunders said. “In the case of the activist investors, that money would be used to generate a return rather than invest — but the same principle applies.”

J.C. Penney, meanwhile, is owned by two of its landlords. Both Brookfield and Simon have invested in other retailers besides J.C. Penney, and analysts have long speculated that was at least in part to prevent vacancies at their malls. Penney’s position as an anchor is especially valuable because an empty anchor often trips clauses in other tenants’ leases that reopen rent negotiations or allow those retailers to leave.

“Macy's doesn't own malls,” Gordon said. “It just does retail, so it closes marginal stores. Simon owns malls, so marginal Penney's stores can be valuable enough to the mall business to keep open.”

Saunders agrees that “the viability of the malls in which J.C. Penney operates” depends on keeping stores running, that the success or failure of Penney stores would influence the malls’ footfall, sales and property value, and that a closure could upset other tenants.

“That would be very undesirable, so the priority is to keep the stores operating for the greater good of the business,” he said. “That said, I think Simon has a genuine desire to make J.C. Penney work better and to keep it profitable.”