Fashion Briefing: What Everlane’s layoffs say about fashion’s state and direction

January 6, 2023 Mary

This week, a check-in on Everlane’s fashion-forward direction amid layoffs. Plus, a breakdown of the corporate shakeups hitting the industry this week. Scroll down to use Glossy+ Comments, giving the Glossy+ community the opportunity to join discussions around industry topics.

Everlane’s layoffs — of 17% of its corporate staff, plus select employees at three of its stores, reported Thursday — shed light on the high speed of recent shifts in the fashion industry. At the same time, they serve as a reminder for brands to prioritize nimble operations.

Over coffee during the last New York Fashion Week, just four months ago, the brand’s newly appointed CEO, Andrea O’Donnell, described to Glossy her big plans to take Everlane in a more fashion-forward direction. She had appointed a pair of co-creative directors, Mathilde Mader and Shu Hung, with experience at Marni and Uniqlo, respectively. They were set to integrate more color, formality and sex appeal, as well as “fashion with a capital ‘F,’” into the brand, with Hung focusing on marketing and branding. For her part, O’Donnell’s prior position was at Ugg, where she was credited with driving buzzy campaigns and collaborations.

As O’Donnell explained it, timeless styles and sustainability were set to remain core to the brand, but creativity would increase in importance.

This week, members of the brand’s creative team, along with customer service and retail workers, were among those let go.

According to The Information, a source “directly familiar with the matter” said the corporate layoffs were concentrated on the brand’s customer service and creative teams.

While Mader remains employed by Everlane, Glossy has learned that Hung left the company for another opportunity in December. Hung had overseen Everlane’s Los Angeles-based design office, which houses an e-commerce studio and opened in January 2022. After joining the company in May 2021, her work included the brand’s first denim campaign in two years, in October 2021. Her responsibilities are being picked up by Mader and existing members of the marketing team.

In September, O’Donnell had also stressed Everlane’s goal of “playing at higher price points.” The strategy was ill-timed. With consumers spending more on necessities including food and rent, they’re now pulling back on discretionary spending. Many sought out hefty deals when shopping for holiday gifts.

Everlane is feeling the heat. In a January 4 email obtained by Glossy, O’Donnell announced the layoffs to Everlane employees, owing them to new pressures for the brand. Among them: “the inflationary environment and recessionary risk,” and “the expectation [among investors] to be profitable.”

However, she also stated that the company’s “strategy and initiatives [had] not shifted.”

Flashing back to September, O’Donnell listed a move away from discounting among brand strategies. “You can’t tell a story about longevity, quality and wardrobe essentials if you’re discounting too frequently,” she said. In its place, she planned to invest in sustainability-focused branding activations around traditional fashion moments, like the holiday shopping season. And, she said, she was exploring partnerships with retailers sharing Everlane’s values and avoidance of promotions.

Since at least October, Everlane has sold through off-price e-tailer Otrium. Currently, 169 Everlane products are selling on Otrium for “up to 70% off,” with a large majority marked “new discount.” For its part, Everlane has been running discounts of 60-70% since December 21. Currently, 624 women’s products are on sale, including 10 dresses that were originally priced at more than $100 — a new, promising category for Everlane, according to O’Donnell in September.

But it’s worth noting that discounting, even among the highest-end fashion brands, is currently rampant in the industry and not atypical of the post-holiday period. The Row, Tom Ford, Oscar de la Renta and Carolina Herrera are all selling styles for 50% off. Altuzarra has slashed prices by 60%.

What’s more, brands streamlining costs via layoffs, in preparation for a worsened economy, is trending. (See the section below.) It’s also smart, said Syama Meagher, CEO and chief retail strategist at Scaling Retail.

“As retailers plan to navigate a recession, it’s prudent that they pull back,” she said. “Growing fears around consumer spending have increased, and keeping lines of credit open and operational staff lean are key ways to weather this storm.”

The retail environment has greatly fluctuated in recent months, with retailers’ mindsets following suit. In September, Glossy stated that Everlane had the “money to try things.” It had just raised $90 million in debt financing, which it planned to use to open more stores — building on its 10 — and develop new products. In 2016, the company’s valuation was around $250 million.

“This recession will be a tough pullback on the retail industry — a wide pendulum shift from the Covid sales peaks,” Meagher said. “I anticipate other [retailers] will be laying off, as well.” -Jill Manoff, editor-in-chief

A breakdown of the tumultuous week in fashion

The first week of 2023 has been a tumultuous one for fashion. Between layoffs at Amazon, Stitch Fix and Everlane, and executives stepping down at Victoria’s Secret, Stitch Fix and Lacoste, a lot happened in seven days.

At Stitch Fix, founder Katrina Lake announced on Thursday that the company would be laying off 20% of its workforce. What’s more, she would be taking over the role of CEO from Elizabeth Spaulding, who’d held the role since 2021, she said. The company’s recent changes, like introducing a flexible spending option for customers, haven’t helped its revenue, which dropped 22% in the first quarter of fiscal 2023.

The day before, Amazon also announced layoffs.

“Between the reductions we made in November and the ones we’re sharing today, we plan to eliminate just over 18,000 roles,” CEO Adam Jassy said in a note to employees. “Several teams are impacted; however, the majority of role eliminations are in our Amazon Stores.”

The announcement came almost exactly one year after Amazon opened its first brick-and-mortar fashion store. It followed that with a second opening in October.

It isn’t only ground-level employees losing their jobs. At Victoria’s Secret, Amy Hauk abruptly resigned this week. Lacoste’s head designer also stepped down. Like Hauk, back in July, Gap’s Sonia Syngal left the company after only a few quarters of declining sales.

This ruthlessness is a reflection of an overall market shift where investors and shareholders alike want to see results quickly and are willing to step in with a heavy hand to get them.

This could also be seen at CES, the trade show where tech startups pitch their ideas to investors and, typically, can land big infusions of venture capital. But this year, startups are reporting much more cautious investors who are looking for immediate returns rather than hype.

Even Amazon, the company that spent $715 million on a single television show, has felt the pressure to be more economical. Jassy told employees, “I’m also optimistic that we’ll be inventive, resourceful and scrappy in this time.”

Amazon calling itself “scrappy” may seem hard to believe, but Karin Dillie, vp of partnerships at fashion resale company Recurate, said all fashion companies will have to learn to do more with less. Recurate raised its largest funding round, of $14 million, in May,

“Investors, in general, are just much tighter than they used to be,” Dillie told Glossy. “They have more play money when the markets are doing well, and the markets are not doing well right now. There isn’t as much ‘dry powder,’ to use the VC term. So they’re going to be a lot more judicious.” –Danny Parisi, sr. fashion reporter