The Canadian Investor - Why Investing Fashion Stocks Is So Hard: 3 Failures & 3 Comebacks

Episode Date: September 14, 2026

Lululemon was once one of the strongest brands in retail. Now comparable sales are falling, guidance has been cut repeatedly, and investors are asking whether the company can regain its footing—or whether its best days are behind it. In this episode of The Canadian Investor Podcast, Simon and Dan dig into why fashion companies can be some of the most difficult businesses to own for the long term. Consumer tastes can change quickly, switching costs are virtually nonexistent, aggressive expansion can backfire, and excessive discounting can train customers to stop paying full price. They look back at Express, Quiksilver and Aeropostale, three once-popular brands whose public shareholders were eventually wiped out, and contrast them with some remarkable comeback stories. Abercrombie & Fitch reinvented its brand, Victoria’s Secret changed course, and Crocs nearly went under before doubling down on the product that made it famous. Finally, Simon and Dan discuss what these examples could teach investors about Lululemon, whether its turnaround could take years, and why waiting for evidence of a recovery may make more sense than trying to perfectly time the bottom. Stocks discussed: LULU, ATZ.TO, GOOS, GRGD.TO, GAP, NKE, ANF, VSXY, CROX, ADS.DE.  Subscribe to our Our New Youtube Channel! Check out our portfolio by going to Jointci.com Our Website Our New Youtube Channel! Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Web player - The Canadian Real Estate Investor Asset Allocation ETFs | BMO Global Asset Management Sign up for Fiscal.ai for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

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We use it for our own business, and it's the first account that actually helps our money work harder while keeping operations simple. Check it out today at eQbank.ca slash business. There is zero moat in fashion. the only moat they have is the idea that the consumer says, yes, I like this. There's absolutely zero switching costs in fashion. So Crocs went from just 109 million revenue in 2005 to 8 and 147 million in 2007. It just became a global phenomenon here.

And by 2007, they generated 168 million in net income. Revenue declined 24% in the span of two years. And then they nearly went under. in 2008, 2009. Lou Lemon had a really bad quarter percent, decline in comparable sales. They reduced guidance for the full year. They went from guiding for three to four percent. Sales increased for the full year to a decline of five to seven percent.

That's kind of why I've learned in the space to always take profits off the table. Welcome to the Canadian investor podcast. I'm Simone Belanger. I'm back with Dan Kent. We have a really fun episode. We'll be looking at fashion. companies. So we'll be giving some examples of companies that were once great and then never recovered and eventually went into bankruptcy. We'll be looking at companies that actually were once great and then

managed to fall out of grace and then recover from that. And the reason we got, we decided to do this episode, it was inspired by Lou Lemon's disastrous quarter. And as I was doing my notes for the last earnings and news that we did on Thursday, I was just getting into it and figuring out, okay, how can they turn things around, what's worked with other fashion companies in the past that were struggling for a period of time and managed to turn it around. And it just would have ended up being way too long for a just news and earning segment. So we decided to do that. You'll go over. You'll start off by essentially just looking at some of the challenges that fashion companies face. and some of the common mistakes that companies do and the quickly changing, I guess, consumer sentiment when it comes to fashion in general.

And I guess Nike and Lou Lemon were kind of the exception in terms of staying power and duration for some time. But even those two have fallen out of favor pretty rapidly over the last couple years. Yeah, I feel like everybody says that such and such company is like kind of breaking the rules in terms of fashion until they don't. And Nike and Lulu Lemon are the, yeah, clear indicators of that over the last while. Yeah, it's almost as if when people say that, it's like a death nail for them. It means that it's going to happen. Although, to be fair, Nike specifically, they were for decades, they were a top brand. Like they really, they were just the exception, essentially.

I think you also have some more luxury brands, like the high-end luxury that have like a bit more of a staying power. But for the most part, most fashion companies, as we'll see, it's the ups and downs at the very least. Some of them do stay fairly relevant for long periods of time. But again, that relevancy kind of ebbs and flows. So they might have it peaked and a bit of a kind of crisis and then recover. But we'll go all over that. We have some fun examples. Had a whole lot of fun researching this.

Looking at really old financial statements too. And yeah, let's get started. Yeah, so I kind of had, I wanted to go over some reasons why I don't really think fashion is a space you can ever money. I don't want to say make money in over the long term, but I would say kind of buy and hold over the long term. And I say this having bought numerous fashion companies, I currently own a Ritzie. I've owned a Ritia for quite a while. I've owned Lulu Lemon in the past. That would have been well before my appearance online with stock trades or even the podcast.

And then I own Canada Goose. But I still do think there's some pretty key reasons why these companies are, I mean, effectively impossible to just set and forget. So the first one I would say is management has the hardest job on the markets. I would say these companies are the hardest companies on the stock market to actually manage well. And some companies just, like if you think about it, some companies just run themselves in terms of demand. So you can think of the railways. They don't need to be consistently tweaking how they generate revenue, adapting to new ways of shipping stuff. You just throw it on the train and it goes.

Obviously, there is some operational efficiencies management can do to, improve the railway, but with fashion, these teams need to be constantly adapting, changing, developing new styles. There is absolutely no, the business runs itself in fashion. If you think of fashion as an exchange traded ETF, it would be the most actively managed fund you can think of, pretty much. So one slip up from management can have pretty devastating consequences, is the wrong brand deal, the wrong product assortment, whatever it may be. You partner with the wrong person, people lose taste, whatever it is, products for a while. And it's impossible to forecast the taste of consumers when it comes to fashion.

You go back to companies that can be forecasted, railways, grocers, etc. Like human behavior in those areas does not shift very much. In fashion, what someone likes to wear. a year from now is absolutely impossible to predict. I don't know, I'll go over each one of these and then if you have any comments, got any comments on that one? No, no, you keep going. I mean, I'm just listening and then I'll go over some examples and just to see some of

the challenges and explain them a bit in reality and what we've seen with public companies and I guess the challenges to hold them for a long period of time. Spoiler alert, there's a lot of capital destruction for shareholders. Yeah. Yeah, and I have not read your notes on the ones that failed, but I would imagine there's going to be pretty much an element of every single thing I'm talking about in the primary reasons. A lot of those companies failed. The second one is there's no moat.

And there is zero moat in fashion. The only moat they have is the idea that the consumer says, yes, I like this. There's absolutely zero switching costs in fashion. There's no feeling of necessity. if someone decides they don't like a product anymore, they'll just throw it in the closet and never buy the brand again. There's pretty much zero friction to switching. The only moat they have is the brand.

Yeah. But again, I'll go back to the example of the railways. Their mode is the infrastructure that is pretty much impossible to replicate. And we'll likely never be replicated. You just can't take that away tomorrow. Whereas in terms of a fashion brand, it's not really something these companies can build once and ignore like the railways. Once the brand has been built up and it does form some sort of moat, the objective is kind of

management's ability to not blow it up, which is pretty hard to do. A lot of them do get, a lot of them do blow up. We're seeing it right now with N Nike. And the one I'll talk about next is expansion ultimately leads to disaster. and we had talked about this on the earnings and news episode that we filmed last week, that the growth of a lot of these financial companies, or sorry, fashion companies, at least in my opinion, is the reason a lot of them fail. So the smaller and more nimble the company is, the better.

However, the faster growing and expansive one is, the better the stock returns. So this is probably one of the most difficult things to grasp, but a smaller fashion company has lower inventory. they can be kind of more nimble in terms of promotions and generally doesn't have a large enough customer base yet for kind of large scale exposure. As they grow larger, store counts rise a lot to meet up with the demand, inventories rise, and the risk of a brand fallout at that point

kind of amplifies how disastrous it would be. And this is for a few reasons. Let's take a smaller company that comes out with a bad fall lineup or something. Sales are bad. They have to mark down the product, but eventually they get it all moved through the door in terms of sales.

For a larger company, a bad lineup for a season or two can lead to a cascade of disasters. For one, your bad lineups come with more volume, more product. You have more stores. You have more product. You have more customers.

And in that case, your markdowns are more publicly displayed. And when this happens, customers are trained and I would almost guarantee everybody listening to this is trained in this way as soon as you see something that is not full price or something is marked down a lot you're just trained to wait for that markdown oh yeah so like you just yeah definitely i've done that for sure yeah yeah you just you don't wait for the full price and as soon as a company overloads inventory, let's say, it needs to mark down a bunch of product, the more they have to do that,

and the more it's in the public's eyes, like people, they'll just wait for sales. So you come out with a new product, these people who still buy, let's just say Lulu Lemon, because I think that's a big situation with Lulu Lemon is they had bad product assortment. And over the last few years, they've had to mark down a ton of product. And now people are just going to wait for the markdowns. So when you come out with a new lineup, it's not like this. need that you need to buy the product. It's like, I'm just going to wait until this product goes 40% off. And I think the larger you are and the more, I guess you could say like nationwide, let's say Canada and the U.S. for Lulu Lemon, the more people are going to see that, which it just

kills your margins and it kills your profitability. So I've been thinking about doing a Quebec city trip where I bring my mountain bike and the family tags along. I could spend part of the day riding while my wife and my daughter explore the city, walk around the old streets, stop for ice scream, and burn that energy in a beautiful park. Then at night, we'd all meet back up, go out for dinner, and make it a family trip. And while we're doing that, our home in Ottawa would just be sitting empty. That's when it hit me. Listing our home on Airbnb just makes sense. Someone else could enjoy our place while we're away, whether they're here for a summer weekend, visiting family, or coming in for a big event in this city. They could explore the Rideau Canal, take the kids to the water

park, catch a CFL game downtown, or just use our place as a home base to experience Ottawa like a local. The extra income could go right back toward our own trip, and we can choose to host only when it works for us. Your home might be worth more than you think. Find out how much at Airbnb.ca slash host. There is an old saying in investing. It's not about timing the market, but time in the market. The most successful investors aren't usually the ones trying to catch every top and bottom.

They're the ones who spend the most time in the market. I've been a quest trade user for over five years, and the reason I stick with them is that they remove the friction of regular investing. With no commissions on stock and ETF trades, You don't have to wait until you have thousands of dollars saved up to make a move. You can contribute small amounts regularly and keep your portfolio growing consistently, removing the stress of trying to time the market.

And they keep making it easier to build a well-rounded portfolio. Soon, you'll be able to trade precious metals through Questrade, giving you even more ways to diversify. Questrade makes the whole process seamless, allow you to focus on what really matters, your investment strategy, not trying to avoid fees. Ready to invest, head over to questray.com, open and fund your account with code TCI and receive $50. Conditions apply.

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Simplify your investing today at BMOetifs.com. That's kind of what I mentioned on Thursday's episode. It's a bit of a growth paradox. So the faster they grow, the more their pricing power erodes. because all it takes is a bad year or two for the consumer to kind of not be interested in the brand anymore or just always expect the clothes for less. And when your input costs stay the same, obviously this is a pretty ugly situation. Yeah, and that's what I'm showing for a little lemon right now is just, yeah, they call it that we made too much. So it's just basically they're discounted stuff.

And even if people like the most recent, the new. assortment and maybe they're like, okay, like I don't want to wait until it goes on sale. Well, they might look at the discounted stuff and say, okay, I do like the new stuff better, but not I don't want to pay 40%, 50% more than the one that I see discounted. That's very close. It might just not be the color that I won, but I can deal with it for half the price or whatever the discount is. Yeah, it's, it is a toxic situation. with fashion is once once you have to start marking down a ton of product you kind of train your client base to just want markdowns all the time and they'll wait it out for the most part a lot of

people like some people might if they have a lot of disposable income or whatever it may be go buy these full price but a lot of them wait for markdowns and then it just becomes a continued ripple effect across new lines because yeah people just don't buy them the next one would be Yeah, and one that's been a classic example, but they are a bit still in a turnaround is gap. So especially if people have young kids, they have actually their kid stuff is like pretty baby gap and kids gap or whatever it's called. Like it's actually not bad. But they had for years, it was basically like you just wait and then they would have like a 50 to 60% sale. And it was there it was Gap or Banana Republic or Old Nies.

Navy one of their three brands, but it seems like they are slowly starting to turn things around on the gap side. And I wanted to mention it because it's not one of the names we'll talk about, but it is a potentially good example. Yeah, you can get out of it. It takes a long time, I would argue, which I think is a situation with Lulule Lemon right now. It might take him a few years to kind of get out of the consistent markdown. And then you have to change sentiment on the brand as well. But the next one is, and this one's interesting. I think it's like it's anecdotal to a certain extent, but I do believe it's 100% true. And that's that new generations actively reject old fashion.

So I think that's another reason why a lot of these companies have not succeeded over the long term. Maybe some like luxury brands that are more so like built on scarcity, I guess, rather than just kind of large supply like Nike or Lulule Lemon. But I think just fashion and clothing in general is kind of a statement about who somebody is. So if we go back to when we were younger, I would imagine a lot of us did not aspire to be like the generations older than us. You would have wanted to be different in some regard. Most of the stuff that was popular in my day would be actively rejected by by younger kids and adults now. Lulu Lemon was probably, that would be a prime example of that as well. I mean, everybody had Lulu Lemon in my early 20s.

And even when I was in high school, everybody wore Lulu Lemon. Like, absolutely everybody. So I don't really pay attention to Lulu Lemon enough to know is like, is this like the younger generations not wearing Lulu Lemon because the older ones did? And they kind of want to go a different route. But this is definitely a aspect in finance or sorry, in fashion. I don't know why I keep saying finance. that does impact a brand's like long-term longevity, I guess. Another situation would be Converse.

Converse has been around for a long time. I think like over 100 years, but it's pretty much been a roller coaster of people are into it, then they aren't into it. People are into it, then they aren't into it. Right now they're not into it. I think Nike's reporting like the worst results for Converse in many, many years. Champion would be another one.

Like when I was in school, champion was the very cheap clothing. Like it was just the cheap brand you wore to school and now a lot of kids are like actively wearing champion. I mean, I have a champion hoodie on right now. Yeah. Yeah, it's, yeah, I think that's another thing here, which is why like a lot of these brands fail to kind of stand the test of time because when you get into that 15, 20 year mark and it's a new generation in, they don't really want to wear what people have worn for the last 15, 20 years. Yeah, I mean, just get back to the converse brand. And so revenues are actually the lowest they've been in more than 12 years.

Yeah, it's fallen off a cliff. Yeah. And then who knows? And a few years from now, maybe some popular influencer will just make him popular again. This is something that you'll see what some of the turnaround plays is just it gets picked up by an influencer and just goes through the roof. Yeah. Yeah. So, okay.

So I have one more. We've mixed up the notes here. I have one more. And the other one would be the fact that a perfect exit is pretty much impossible, in my opinion, unless you get very lucky. So I own Canada Goose. This would have been like 2017. I think it was at its peak pretty much. And I got a bit lucky and ended up selling half of my position.

There was no real logic. I was up 250%. So I just thought, hey, let's book some profits. If you're going to sell fashion once, once, like you own a fashion stock and you. your plan is to make the money and exit once, this is pretty much the thing you need to happen. Like you need to get lucky to a certain degree because if, if you're waiting for some sort of like,

I guess you could say crack in the foundation of the brand or something, like the market prices this in almost immediately. Like it's, if you had, like for example, I own a Ritsia. I'm fairly bullish on a Ritsia, but I do understand that.

if Eritzia were to even post one mediocre quarter, I would imagine that stock would fall 25 to 30% after earnings. And that's what a company like Group Dynamite did. After they reported like a so-so quarter, I think they fell 20, 25% after a big run-up. So that's kind of why I've learned in the space to always take profits off the table. Like I've, I've booked profits on Eritzia for years. I haven't really added to my position. The position has gone up so much that I've been able to kind of takes them off all the time. This area of the market is absolutely vicious. Like one small earnings miss or guidance miss will send a fashion stock.

That's going through some pretty big momentum like into the absolute gutter. So if you do own companies in this space, I would say always take money off the table because if your plan is to take money off the table when you think growth is slowing, that's too late. Like the market's going to detect that and dump the stock well before. Although I would say you oftentimes have the opportunity. So even if there's a quarter that is showing some warning signs, sure, you'll probably not, you won't get as high in terms of your returns if you sold before the signs started happening. But Lula Amin's a really good example.

So what I'm showing here is since January of 2024, you can see the decline here. And you can see a big drop around April of 2024. I'm assuming that's when they reported the prior years. They would have to be. Like those cliffs and price have to be post earnings. And if you look at the comparable sales, just looking here at the quarterly. So you can kind of see that the January 2024 quarter, they had 7% comparable sales for the Americas. Before that, it was divided between the U.S. in Canada.

and then it just lumped in together. So that's why it does not go any further. And then you look and it's starting to be essentially comparable sales that are flat to negative. But if you sold around the first warning sign, you probably would have still booked a nice profit. If you helped on, that's when things got even worse. Of course, it could have been a one-off quarter. And I think that's what investors tend to try and think it might be a one-off of one or two quarters. but usually you'll get the chance to still exit the position or reduce your position.

You still won't have high profits. But I wanted to mention that because I think you're not wrong. The stock does take a hit, a pretty big hit. But if you've held it for a very long time, you can oftentimes still book some pretty interesting profits. If you held for a long time, yeah. My argument to that would be I did not really have when Eritzia was trading for $25, pretty much nobody asked me about it. But now once it broke $100, I had a ton of people asking me about it.

So people often buy these very late in the growth cycle, I guess you could say, which Eritzzi has a growth cycle might go on for another 10 years. You just never know. But most people get into these companies well after the huge run-up in popularity has been realized, I guess you could say. So that would be one of the issues. if you kind of got in on the ground floor, because like my first buys with Eritzia were back in 2019.

I was at high teens price, I think. So I mean, in that case, yeah, I would probably have a bit of cushion to say, okay, that was a bad quarter, I'm going to bail out. But a lot of people probably bought it at a lot higher prices. It might even be in the red, whatever it may be, if the stock were to take a dive. Okay.

Yeah, so let's go on some actual examples. So just has a refresher here for those that are not on, on YouTube watching the video. Lul Lemon had a really bad quarter. I know we talked about it a little bit here. 10% decline in comparable sales. They reduced guidance for the full year. It's actually the second quarter in a row.

They reduced guidance for the full year. So they went from guiding for, I think it was 3 to 4%. Sales increase for the full year, reduced it to flat, and then reduced it to a decline of 5 to 7%. So that's as quick of a really, negative turn as you can get. Clearly, it's not out of the blue. Lou Lemon has been struggling for a couple of years. They got rid of their chief product officer, if I remember correctly, about two years ago. They noticed that the product was not

resonating as well with their customers as they had hoped. So just to give some context here, and we want, like, I wanted to look, look, is it possible for Lou Lemon to turn things around? And yes, it is. There is a big cemetery of companies that have not turned it around. But I'll give some example and some that are actually like pretty relatable to Lulam and how they could achieve that. So the first one is companies that just never recovered. And some of the elements that you talk about why they never recovered will be there.

So the first one here is Express. And Express is a clothing brand that was aimed. It's still a brand that exists now. And I think that's an important distinction because. you have some of these companies that actually most of these I think or every single one actually went bankrupt and then was bought out by invest or private equity or these type of firms out of bankruptcy and they are brands that still exist today but shareholders when they were publicly listed got completely wiped out and Express is one of those so it was selling kind of work casual

type of clothing going out closed or target market was people in their early 20s, early 30s. So it was also like not a super expensive price point, but not cheap as well, was kind of that middle ground. So affordable for that cohort of demographic. And in 2011, it had more than $2 billion in revenues and that generated more than $140 million in net income. So really not a bad business for a fashion retailer. Their operating margins were at 13%. And it's actually a company because I was starting my professional life and I actually liked their clothes for like kind of professional work clothes and going out. So I was pretty familiar with them. I remember going to Syracuse to see my family during Black Friday and getting some awesome deals at their express stores. I think it's

Carousel Mall in Syracuse. And I think now it's like Mall of America or something like that. But it's or Destiny USA. No, it's Destiny USA. There you go. That's the mall. But it changed. a while back. It was not a Trump thing in case people were wondering. I thought that's what you were get that. No, no. And by 2016, their operating margins, so they were, the operating margins were 13% 2011. By 2016, the operating margins that were down to 4.7% and it dropped below 1.5% in 2017, 2018. So for them, the biggest issue was not like sales actually stayed fairly constant, but they were facing increased competition by fast fashion brands.

So I'm sure you've heard of H&M or Zara. Those were the companies that were really eating into their market share because Express wasn't really a luxury brand. So for a lot of younger people, fast fashion was definitely like an alternative. And especially if you're younger, you're like, you know what? The clothes like look as good from H&M than it does Express and it's cheaper. Sure, it might, the fabric might not be as nice after like 10 washes. but whatever, I'm also paying half the price.

So what can you give me now? And that was a big pressure on Express. So they started the vicious cycle. So they started to discount heavily, which started hurting margins. COVID was definitely the final nail in the coffin for the publicly traded company. Sales took another hit and was forced to file for bankruptcy in 2024. And this is not the only one that will be on this list, but it got bought by retail venture that was essentially owned by real estate companies. So Brookfield property partners,

Simon's property group, amongst other thing. And the reasoning is that they had such a present in those malls. So these are mall operators for the most part that letting them go out of business and not be bought, it would mean probably like hundreds of vacancies across all of their malls. Because, you know, if they own 50 malls and express as, you know, a boutique or shop that they're leasing in 40 of those malls. I mean, what the hell happens if Express doesn't get bought? Like you're losing a tenant, right? Like they've went to bankruptcy, so they're not paying you.

So they ended up buying the brand. The brand, like I said earlier, and I was showing on the screen share here, still exists today, but shareholders of the former public company got completely wiped out. And this is one of the RIS that you'll see. And I think it's really important to just mention, like, there's no harm in taking profits. Like, I know a lot of people are probably sitting on, like, massive Eritzia profits. There's no shame in, like, at least trimming. Maybe one is still right.

Maybe you think the brand has, like, years of growth ahead. But these things can turn around on a dime. And that's a lot of what you'll see with these companies is things were going great until they weren't. That's essentially what happened. and it can't happen very quickly. I think that's one of the main reasons why Lulu Lemon is struggling as well with the leggings. Is there just there's cheaper, probably lower quality options? Like I know Costco made some and Lulu Lemon, I think, had to sue them.

I think Lulu Lemon was in a lawsuit with Costco because Costco just made the same leggings and they were probably a fraction of the price. So yeah, it's definitely something that can hit a company. And then you need the brand to be strong enough where someone says, I'm going to buy Lulu Lemon's leggings even though they're more money. And as soon as that falls apart, then the whole thing falls apart. Yeah, it's usually two things, right? That affects demand.

It's either customer preference or competition or a combination of both. That's essentially the two big things that can then start a spiral and will amplify the mistakes made by the company if there has been some. Like, for example, opening too many stores would be one of them. Express was interesting when I was looking at the number of stores. It wasn't really that much of an issue. They kind of shifted. Yes, they opened some new store, but they downside some of them.

Obviously, COVID had a big impact for them. But it wasn't as much for the store. It was really just customer preference, increased competition that really hit their margins. And then they got into the discounting cycle. I've been thinking about doing a Quebec City trip where I bring my mountain bike and the family tags along. I could spend part of the day riding. while my wife and my daughter explore the city, walk around the old streets, stop for ice cream, and burn that energy in a beautiful park.

Then at night, we'd all meet back up, go out for dinner, and make it a family trip. And while we're doing that, our home in Ottawa would just be sitting empty. That's when it hit me. Listing our home on Airbnb just makes sense. Someone else could enjoy our place while we're away, whether they're here for a summer weekend, visiting family, or coming in for. for a big event in this city. They could explore the Rideau Canal,

take the kids to the water park, catch a CFL game downtown, or just use our place as a home base to experience Ottawa like a local. The extra income could go right back toward our own trip, and we can choose to host only when it works for us. Your home might be worth more than you think. Find out how much at Airbnb.ca slash host.

There is an old saying, in investing. It's not about timing the market, but time in the market. The most successful investors aren't usually the ones trying to catch every top and bottom. They're the ones who spend the most time in the market. I've been a quest trade user for over five years, and the reason I stick with them is that they remove the friction of regular investing. With no commissions on stock and ETF trades, you don't have to wait until you have thousands of dollars saved up to make a move. You can contribute small amounts regularly and keep your portfolio growing consistently, removing the stress of trying to time the market.

And they keep making it easier to build a well-rounded portfolio. Soon, you'll be able to trade precious metals through Questrade, giving you even more ways to diversify. Questrade makes the whole process seamless, allow you to focus on what really matters your investment strategy, not trying to avoid fees. Ready to invest, head over to Questrade.com, open and fund your account with code TCI and receive $50. Conditions apply.

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You can still buy some quicksilver stuff. Yeah, it's readily available. So it's just, it's important to know because I think a lot of people might think that these brands are surviving the test of time. And sure, they are to some extent. But again, as an investment, it's two very different things. So it's still, you can still buy some quick silver stuff. If you're not familiar with the brand, it's always been kind of a surf slash no. board type of clothing brand. And in 2005, they made one of their big mistakes. So they bought the

ski equipment maker, Reseigneur. Are you familiar with that one? For like Alpine skis. So they make skis, boots and stuff like that. Oh yeah. Yeah. So they're pretty big. So it was a French brand. So they bought it for 320 million and stole the brand three years later for half of what it had paid. So I guess the reasoning at the time was that, okay, we're like a snowboard slash surf kind of clothing brand. Like, let's expand into skiing and a whole other market. It clearly did not work. And they ended up selling it for half the price to a group that included, I think, the former CEO of Restignan, which is kind of funny, but clearly.

Whole circle. Yeah, exactly. And they also expanded aggressively when the brand was hot in the late 2000s between 2013 and 2015, revenues declined more than 26% across the Quicksilver brand portfolio, which included things like DC Shoes and Roxy. They had high fixed costs, high debt, and declining sales, which eventually led them to bankruptcy. And they filed for bankruptcy back in 2015.

Before being taken over, you may have heard this company, Oak Tree Capital. So they were taking over. So that's another Brookfield kind of finger. Yeah. Yeah, exactly. And today the brand is still alive. It operates by, it's operated by Autantic Brands Group, which owns board rider, which was essentially Quicksilver was renamed as board riders, I think a year or two after Oak Tree took it over. And the company, again, is still alive today, but it's the same thing as you saw for Express.

Shareholders at the time got completely wiped out. Yeah. It's a lot easier to keep a clothing company alive when you're buying it out of bankrupt. because you're getting a very good price on a lot of things. So yeah, there is a big difference there. Yeah, exactly. And then the last one is Aero Pestal. So this one was not really a brand I was all that familiar with,

but I do remember seeing a lot of their stores. Again, a brand that's still in a life today, the actual brand. But again, you have shareholders that I believe got completely wiped out for this one as well. So I'm just showing their website here. What did you call it? I hope a star. I believe that's the correct is what I say. Yeah.

With the accent on the E, I'm going to go and say that I have the right spelling and you do the pronunciation and you don't. But it is. So this one was a company that was targeting teenager for the most, like for the most part and at more affordable prices. At its peak in 2010, 2011, it reached over $2 billion in sales. And in their 2015 annual report, they said, their, and I quote, shift in customer demand away from logo-based products. And this is something I'll also talk about one of the turnaround plays for Abercrombie and Finch. So they were also big in the kind of logo-based products.

And that was a big part of their offering. And they saw a shift in consumer demand there. So by that time, the company sales had declined to $1.8 billion from the $2 billion I mentioned. They went from $60 million in operating income in 2013 to an operating loss of $213 million in 2015. So you can see now that they're starting to bleed a lot of money at that point. And again, they were casualties of shifting consumer preferences and increased competition, especially by fast fashion. Once again, retailers like H&M, Forever 21, which also went bankrupt.

It was a privately held company. So keep that in mind. Zara Uniclo were all companies that really intensified the competition for Europa Star. Another misstep was that the company, surprise, surprise, expanded its store base even though warning signs were there. So there were wording signs that sales were kind of plateauing, that consumer preferences were shifting, but they still went ahead and opened some stores. And in 2016, they filed for bankruptcy and then a consortium involving Simon Property Group, Again, general growth properties, another small owner and a few other companies stepped in because, of course, Eropostat had hundreds of their stores and their malls.

So again, they stepped in to buy the brand and avoid some vacancies into their malls and obviously benefit from the brand and buying it at a steep discount. But again, the results were the same. Shareholders got wiped out here. And just like Express and Quicksilver, the brand still exists. despite the public company filing for bankruptcy. Just owned by the malls themselves, I guess. Yeah, yeah, exactly. So it is kind of, it is interesting when you think about that,

that yeah, the malls are actually, they stepped in, which makes sense if they had the wherewithal to do that. Yeah, you don't want these empty spaces for sure. So, I mean, it's probably a net benefit for them to buy them. Yeah, exactly. Again, especially for probably like very discounted prices coming out of bankruptcy. They probably got very good deals to buy these companies. Yeah, no, that's it.

So now we'll look at some of the turnaround plays. So the first one is Abercrombie and Finch. So this one really interesting. So I'm sharing here what you can see. And if you're familiar with the brand, what it looked like in the 2000s, this is completely different. Like this is a brand that looks like almost like a family brand now. Yeah. And they offer like some casual, even like kind of work type of clothes that you could put,

kind of clothes for going out, but more in a classy way. And then you compare that here with what you had back in the 2000s where you had like essentially it was like a dark kind of ambiance. I'm trying to show this is a bit more what it looked like back into the 2000s. So the stores were not as bright. They were darker. You had like male shirtless models that were like at the front of the store. It was full of perfume.

I was definitely aimed more at teenagers and young, young adults. And it was very popular. I don't know if you remember those stores back then or not. Yes. It gives me like whenever I think of this company, I just think of American Eagle. Kind of like the same style of clothing. And yeah, what everybody wore.

I think Abercrombie really pushed it more. like the kind of sexualization. I don't know like how to say it, but I guess that's part of it. And it was a very popular company. I remember going in there. I hated it because I found like the perfume really like irritated my nose. No, it's true.

Like I just, I hated it. And it just was not my style back then. But now, you know, a lot of stuff I could like, I'm like, okay, that looks more like it honestly looks a bit like gap and stuff like that.

Like it's not, it's so much different than it used to. but back to how it kind of peaked and then went down so by 2002 they were doing about 4.5 billion in sales so pretty pretty interesting revenue that you had over there and then things sorry by 2012 they were doing that and then things started going a bit downhill so for those viewing here you'll see that sales kind of were on a roller coaster it was just another one got hit hard by fast fashion again Again, those H&M, Zara of the world. It also had an image problem because it became controversial.

And by 2016, sales declined to $3.3 billion. And the turnaround began in 2017 when this current CEO friend, Horroids, became CEO. She essentially killed the old brand. So this is kind of unique because they really revamped the brand. They didn't go back to their roots, which will be different from the next two that I'll talk about. And they removed, as you saw from the screen share, they remove all the controversial stuff that made them popular like those models, remove the nightclub type of vibe, the sexualization, and changed the target customer from teens to young adults, even adults in their 20s and 30s. So completely different.

They move towards casual clothes, work clothes, hairily clothing, denim and more. Completely different offering. And the stores also became, like I highlighted, just more welcoming, brighter. and social media was a big tailwind for them. And revenues stabilized between 2018 and 2023, between 3.5 and 3.8 billion roughly and then the low of 21 at 3.1 billion, but I assume that was probably in part because of COVID right in the thick of it. And they took off in 2024 and the trailing 12-month revenues now have hit 5.3 billion, well, like, easily surpassing the $4.5 billion that they saw in 2020. Yeah, if you look at this chart of revenue, you can see how long it takes once something like this kind of falls out to turn it around. Like you have 2013, February 2013 revenue of $4.5 billion.

They didn't get back to that for 12 years, February 2025. They finally eclipsed it. Yeah, you can just see like once you need to adapt here, like how much effort needs to be put in and how long it can take to turn things around, which is. I mean, again, I go back to Lulu Lemon and a lot of people are, because I think Michael Burry owns Lulu Lemon and he's fairly bullish on it. Like, you might be, even if they do turn around, you might be three, four, five years. Yeah, like you never really know how long it takes. Okay. Yeah.

And now let's move on to the next one here. So this one here, I guess it's PG-13. Let's just show what it is. So Victoria's Secret. This has been quite an interesting turnaround for the company. If you start looking here at just the stock has done quite well over the last few years. I know it's a bit in the drawdown right now, but overall has done very well. If you're looking at the last three years, especially the stock is up 339 percent,

five years a bit less because it's kind of gone up and down. But overall, some similarities here between Abercrombie and Finch and Victoria's Secret, but differences as well. So by 2016, the company had near $8 billion in revenue. And it was just a powerful brand, right? You had these supermodels. They were definitely banking on sex appeals, sexual fantasies, exclusivity. And every year they had massive fashion show with their models.

And they had like these crazy wing dresses. But, oh, yeah, I mean, I've watched a few, so I can't say I haven't. My wife actually really liked those shows. So she'd like, Ramiya was, I think usually in December. But the branding started eroding with customers demanding more. body positivity, clothing and shifting towards comfort and lat leisure as well. And I'm trying to here, just pull up the, there you go. So the revenues doesn't go super far out because I'll explain why.

And they also made some strategic mistakes by exiting the swimsuit kind of category while facing surprising challenges with bras and lingerie. And the owner of Victoria's Secret at the time, LBrands wanted to reduce exposure. So it tried to sell a stake in the company or the brand because that was one of their brands. But that fell through because of COVID. And in 2021, Victoria's Secret became its own publicly traded company. So that's why there's limited information if you go on a site like Fiscal.a.i. That's why it's not like really far out. It was owned.

It was a subsidiary before that. And in 2023, they pivoted again a bit more towards their roots, but using a more modern, inclusive approach. So they pivoted to more of an inclusive approach, and then it was, I guess, too far on the, like, on the one side of the pendulum. And then they pivoted back in 2023 to more of their roots. So I guess a bit of a hybrid between what made them popular back in the 2010s and maybe not being as on the sexualization or sex appeals size, but still embracing that part. And after canceling the fashion shows that I mentioned from 2019 to 2022, they returned in 2023 through a different concept and then back to their more traditional shows that they had prior to 2019 in 2024, 2025. So they kind of embrace back to those routes. And although revenues have not gotten back to their $8 billion peak, they have been increasing now for three years straight and are significantly up in 2021 since 2021.

and 2026 sells their guidance, it's expected to continue another like 3, 4%. And I guess the last thing here in terms of tailwind, it's obviously it's a brand that's focused on women. A big thing, a booze that could have been a big thing for them is GLP1 drugs as well. Because when you're taking those drugs, you're losing weight. I would assume that there's a lot of women that may not consider

some of their offerings, but now that they feel more attractive because they, Lawsome weight, for example, while they may consider the brands. So it could be a GLP1, could definitely have played a part into that. I didn't see it on their recent call. I'm not sure if that's something they addressed, but it could have been, could have been play into that. Yeah, I don't have much on Victoria's Secret.

I do not follow the company. I mean, I know as soon as I think of Victoria's Secret, it's pretty much just all lingerie. That's all I kind of think about with this company. So that's about my extent. But yeah, you want to move in. into the final one, which is actually, I think, the wildest one. Yeah. So the next one here is, is Crocs. So that's, that's always a, yeah, it's a, it's an interesting one because it's a very kind of niche unique products. It feels like. So I'm just sharing here the website. So Crocs,

it's, again, it's very interesting story. I'm going to just show the overall revenue here, how it's, yeah, how it went over the years. So, This is a company that's been publicly traded for quite some time. So Crocs went from just 109 million revenue in 2005 to 8 and 147 million in 2007. It just became a global phenomenon here. And by 2007, they generated 168 million in net income. So they were doing quite well here on a net income basis. But then they had trouble keeping up with demand.

So they really invested a lot in manufacturing capacity, warehousing, inventory, international operations, stores, and additional products. That's always tricky. And especially when you see that demand reversed in 2008, of course, in part because of the financial crisis. It coincided with Crocs falling out of fashion. Revenue declined 24% in the span of two years. And then they nearly went under in 2008, 2009 with the auditor saying that there were substantial doubt under its ability to continue as a going concern, meaning that essentially the auditor wasn't sure they could continue operation. That's just what it means

in accounting speak. And Croc's closed manufacturing facility. They cut employees. So they really reduce expenses. They stabilize a company. And for years, Kroc tried to become a broader footwear company rather than just relying so heavily on the classic kind of clog that it's known for. and the business survived, but the brand wasn't producing another major growth cycle. The turnaround really started with Andrew Reeves, so he joined the company in 2014 and became CEO in 2017. Still the CEO today. And Crocs simply simplified again and continued to cut costs and reduced a store account. And they doubled down on what make Crocs unique.

Instead of trying to make Crocs less weird, they just doubled down on just the weirdness and just the fact that it was that classic clog at the center of the brand. And then they used essentially scarcity, customization, social media, and collaborations with celebrities and designers like Post Malone, Justin Bieber, as two examples. And the sales really took off, if you're looking here on YouTube, starting in like 2020, 2021, sales really took off. I mean, from 20, from the. The kind of 10 year low, roughly of 2017, sales have pretty much quadruples since then.

Yeah, it's post-pandemic, just crazy resurgence. Yeah, it's crazy. It's just like it's, and this is an example here. Maybe to wrap this one up, it's an example of what Lululemon could do to maybe get back a bit more to its roots in terms of, I think they've definitely been guilty of trying to. probably do a bit too much. And they've come out with like backpacks, fanny packs, obviously men's, women clothing, dress, casual. Like they, they've went out of just the at leisure category that they had. So maybe simplifying that and going back a bit more to their at leisure yoga type of offering would be a stretchy thing from Lou Lemon.

Although it's not the only example when you're thinking about it, right? like some of the examples I've given. If you're just taking Abercrombie and Finch, they went into a completely different direction and it's worked out for them. Victoria's Secret is probably a bit more of a mixed bag where, yes, they went back to what made them really popular, but they also had a bit of softer tone to their marketing, but still a bit more to what made them popular.

And then you had crogs that just went back to, like, to its origins and just doubled down on what made it unique. Yeah, and I think Crocs, like, to a certain degree, you don't eat, you buy the shoes, but then you buy all, like, the little things that go in the, in the holes of them. Like, I have family members who, like, they come out with different ones all the time. Every time I see them, there's, like, different things attached into the Crocs. Yeah, so, I mean, that's just an added selling feature as well. Oh, gibbets. Jibbitts.

Yeah, my daughter. Jibbts is what they call. Yeah. Yeah. Yeah. So, I mean, that's just further fuel. That's the one that, ah. The one I was going to show the one that my daughter has, but no, I mean, I think it's just, it was a fun exercise to go through that.

Obviously, there's countless more examples of companies that were able to turn it around. I think Adidas is one with the whole, I think, what was it, Kanye West disaster where they had like a shoe branded with Kanye West. And they had to write down tons of inventory. And then they had the, I think the pumba or whatever, the Zumba or I can't remember. Like, no, no. They had like a shoe that came back into, into style. I'm trying to think here. Yeah. Yeah. So they had, yeah, they had the Yeh products with Kanye West and then they had a new style. I'm trying to think, but I can't think of the one. But they essentially, they've made of turn around a little bit in the last couple years here. Yeah, and even them, they're down quite a bit. Yeah, it's a tough space to,

to survive in. I mean, we've went through pretty much a wide variety of examples like Crocs. Crocs almost went broke. I would say that is more like just very bad timing. Samba. Yeah, yeah, I'll show you. So people, they're probably like yelling at their so there you go. So this style.

So this was popular in like the early 2000s. So they really have been crushing it with this style. Yeah. That's what my I own those golf shoes. Okay, they're not golf shoes, but okay. No, they have Samba golf shoes. Like I actually don't. Oh, they do. Okay.

I didn't even know that I own these, but yes, I own a pair of these. There you go. Not actual sneakers, but the golf shoes. That's hilarious. Yeah. But I think, yeah, I think they'll be interested just to follow the little lemon, see if they turn things around. I think for them, too, they've been aggressively still opening stores.

They were asked on the call whether that was a good idea. And they kind of said, well, we'll continue until 2027. really optimizing stores and looking at we're opening where we think it's a good place to open. I mean, I feel like they have a good balance sheet. I think that is one other thing is a lot of these companies, I forgot to mention is they were saddled with debts that never recovered. So the debt load was a big factor for them going bankrupt.

And Lou Lemon does have a lot of, it generates a whole lot of cash flow. They are still doubling down on share buybacks. So we'll have to see. but I think the prudent thing would be to take that money, not buy back too many shares, even though you want to buy back when the price is low. You also want to turn around the company and then maybe reduce the footprint a little bit,

focus, get a bit more to your core, get more into what people love Lul Lemon for, and really listen to the younger generation because my feeling as well is that the younger, the below like maybe 30 or let's say below 20, Like my sense is they're not shopping as much at Lula Lemon. My sense is that it's more than 30 plus to like 50, 60, that age bracket that are shopping there. But again, if you're just focusing on that, you're not getting a new cohort of customers.

So sure, they may not have as much money. They're not further into their earning professional careers. But that's something that I would probably think that they'll want to do. Yeah, that's kind of the element I brought up that what the older generations wear, like you have to convince the younger generations to continue to wear that. So like Lulu Lemon was kind of our thing, like millennials, I guess you could say. I don't see a lot of other people wearing them. But yeah, I mean, it's probably I wouldn't expect a quick turnaround,

but I would say, yeah, just stop the store openings, fix what you can and then kind of work off that because I mean your sales are declining there's no sense in trying to save them by opening new stores get it back on track and then start doing start opening more stores but yeah it's probably a long road back yeah and we'll see they have a new COs so I know she's coming from Nike and Nike has not been the best example over the last four or five years but you have to give her a chance and I think for me it's one that I will have on my radar. I think they can turn things around. I don't think it's impossible.

I don't think it will be easy and it's no guarantee. And I guess I'll finish on this. It's a company that I'd rather be a bit too late on. So I'd rather wait until I start seeing things slowly turning around than going in now with the hoves that they'll turn it around. Sure, if you go at it now or in the next few months or next few months or next few quarter if things get a bit worse, you'll probably get it cheaper, but the risk of them not turning things around is also greater. So I'd rather start seeing things slowly turn it around

and then investing even if it means I'm missing out on the first like 15, 20, 25% gains than being too early. Yeah, I think being late here would be better than early because it can continue to go down. If they report another quarter of, I mean, slow growth and then they have to reduce guidance again, it's going to go down again. Yeah, no, exactly. So we'll wrap it up. Hopefully you like this episode. It was definitely a fun one to do. Countless examples. I mean, the fashion graveyard is filled with companies that have gone bankrupt. So, and I guess that probably the biggest takeaway here is invest in fashion if you want, but there's nothing wrong with ticket profits if you're sitting on some nice gains and also realize that they, it's usually

not a buy and hold forever. It's something you want to keep a close eye on because once consumer sentiments and preferences start to shift, it's very hard to get back on track. Yeah, definitely. Okay. So let's call it an episode. Thank you for watching. We will be back for a news and earnings episode on Thursday. So if you're watching this on YouTube, you can just listen to it on your favorite podcast player. See you soon. The Canadian Investor podcast should not be construed as investment or financial advice. The host and guest featured may own securities or assets discussed on this podcast. Always do your own due diligence or consult with a financial professional before making any financial or investment decisions.