When Walmart bought the fashion retailer ModCloth in March 2017, some called it an unlikely fit: The brand was (and is) best known for its quirky apparel and accessories and its pun-happy marketing copy, while Walmart was (and is) about as far from “indie” as you could get.
Still, the reported $50 million purchase was one of several acquisitions the Bentonville, Ark.-based retailer has made in recent years. It also acquired footwear retailer Shoebuy (now Shoes.com) for about $70 million in February 2017, outdoor apparel retailer Moosejaw for $51 million in February, menswear brand Bonobos for $310 million in July and plus-size brand Eloquii for $100 million in October 2018. All were spearheaded by Marc Lore, president and CEO of Walmart’s e-commerce division and the founder of Jet.com, which Walmart acquired for $3.3 billion in 2016.
At the time, Walmart touted ModCloth’s engaged millennial customer base, strong social media presence and inclusive size range, and noted that apparel and accessories were the top category for online spending.
Now, however, the retail giant is said to be in talks to sell ModCloth as it struggles to balance competing forces within the company: its ongoing efforts to compete with Amazon as an e-commerce leader and a push for profitability. According to a report from Recode, Walmart’s U.S. e-commerce division is forecasting losses of $1 billion this year on revenue of between $21 billion and $22 billion.
While its online sales were up 40% last year and CEO Doug McMillon said on its most recent earnings call that the company is becoming “more of a digital enterprise,” it’s still the brick-and-mortar business that’s driving Walmart’s profits. Sources also told Recode that neither ModCloth, Bonobos nor Eloquii is yet profitable, and in an effort to shed one underperforming business, it will likely try to find a buyer for ModCloth this year. (A private equity buyer also reportedly approached the team about buying Bonobos, but Walmart rejected the offer.)
Apart from revealing some unrest at Walmart, this also signals that the company is unlikely to go after any other buzzy direct-to-consumer brands in the near future, though Lore has previously said that he wants to buy more. Instead, Walmart may focus on building up its more profitable private label businesses, which tend to be priced more affordably to target its core customer. (Eloquii, Bonobos and ModCloth products are sold on Jet.com, but not Walmart.com.)
In that realm, one of its competitors is already seeing impressive results: Target’s women’s fashion brand A New Day, launched in November 2017, reached $1 billion in sales in its first year.
Walmart’s Fashion Empire Is Growing — Here’s Why That’s a Big Deal