Tax law glitch puts crimp on store renovation plans
A drafting error in the new tax law is causing some retailers and restaurant owners to delay their renovation and improvement plans.
As written, the law allows companies to write off renovation costs (made to non-residential real estate) over 39 years. The authors of the tax law had intended for the businesses to be able to write off the full costs of the improvements in one year.
A group of more than 100 retailers, restaurants and trade groups, including the National Retail Federation and Retail Industry Leaders Association, have urged Congress to take “quick action” to make two technical corrections to law.
“The delay in correcting these provisions has caused economic hardship for some retailers and restaurants and is also delaying investments across the economy that impact the communities in which these companies are doing business,” the businesses and groups said in a letter sent in June to the top Republicans and Democrats on the congressional tax-writing committees.
One of the technical corrections sought by the group has to do with the renovation write- off.
“This very large difference in the after-tax cost of making improvements is causing a delay in some store and restaurant remodeling projects, as well as causing some retailers to decline opportunities to purchase or lease new store locations that would require substantial improvements,” the retailers and restaurants stated in the letter.
The second correction is related to the effective date of a provision that generally bans businesses from carrying back net operating losses to prior years. Lawmakers had intended for the ban to take effect for taxable years starting after Dec. 31, 2017. But the law instead says it applies for taxable years ending after Dec. 31, 2017.
Republican leaders have acknowledged the mistakes, but there is no quick fix in sight at this point as the corrections would require consensus across the aisles.
Fabletics sets aggressive store expansion
The activewear brand co-founded by celebrity Kate Hudson is celebrating its five-year anniversary by setting a course for aggressive growth.
Fabletics, which currently has 24 stores across the United States, announced it will expand its retail presence by adding more than 75 new doors, giving it a total of 100 locations. The privately held company, owned by TechStyle Fashion Group, will also unveil a new store concept this September, in Bellevue, Washington, which will reportedly include a high-tech payment processing system and a leggings bar among other features.
Fabletics, a winner of Chain Store Age’s Breakout Retailers Awards in 2016, was launched online in 2013. It made the leap to brick-and-mortar in 2015 with a sleek store model that combines online and physical retail, with a membership model feature. The brand boasts 1.4 million VIP members, who enjoy in-store perks among other benefits. The company said it continues to see over 20% increase in same-store sales year-over-year, and has surpassed $300 million in revenue.
In other initiatives, Fabletics plans to debut a “brand evolution” that will result in increased merchandise frequency, with new capsules dropping as often as once a week, as well as enhanced products across all categories. The new collections, available starting in July, utilize advanced performance technologies optimized for different activities, in addition to fashion-forward designs that expand on Fabletics’ signature bright colors and fun patterns.
The company is also focused on aggressive global expansion. In the fall, Fabletics will enter its first international distribution partnership, which will introduce the brand to the Philippines through free-standing stores, shop-in-shop concepts and an online shopping site. The agreement is the first of other international partnerships as well as company-owned expansion plans that will result in launching new territories throughout 2018 and 2019.
In line with its next phase of growth, the company is also adding to its leadership team, including the appointment of industry veteran Karen Pornillos as VP of design and fashion director. She served as VP of women’s design for Lululemon Athletica, before joining Free People to lead design for the brand’s activewear line.
In addition, the company named Nancy Arnold as VP, creative director. She has worked across a mix of emerging disruptors and admired brands such as Chloe + Isabel, Victoria’s Secret and Ann Taylor.
“Driven by innovation, inspired by community and grounded in authenticity, Fabletics embodies what today’s consumers value most in brands,” said Adam Goldenberg, co-CEO and co-founder TechStyle Fashion Group, which also owns ShoeDazzle and JustFab. “Fabletics has succeeded beyond our expectations under Kate’s vision and our new team members, and I’m confident Fabletics will continue on its incredible growth trajectory.”
Iconic off-price fashion retailer highlights ‘best of best’ in new format
Century 21 has become the latest retailer to try on a smaller-sized concept.
The high-end, off-price fashion retailer, known for its discounted designer fashions, unveiled a small-store format, called Century 21 Edition, at Staten Island Mall, Staten Island, New York. It recently opened a second location, at Roosevelt Field Mall, Garden City, New York.
Approximately 5,000 sq. ft. each, the stores feature a curated selection of designer women’s shoes, accessories, sunglasses, watches, handbags, and fragrances. The retailer described Century 21 Edition as a new strategy and said it will highlight a “best of the best” curated assortment of products.
“The goal of Century 21 Edition will be to showcase our most coveted merchandise, allowing us to quickly modify our assortment based on market demands,” stated Raymond Gindi, CEO, Century 21 Stores.
In a first for Century 21, the Roosevelt Field Mall location also features an optical boutique. The retailer partnered with Vision Express to offer an array of in-store optical services as well as discounted prescription frames from Tom Ford, Fendi and other brands.