The received wisdom in corporate America is that to you need to spend money to make money.
And that’s true enough.
But exactly how much money companies choose to push back into their businesses and how well all of those dollars are spent matters — a lot.
Fashion is going through something of an investment cycle, pouring more resources into both technology and stores.
A WWD study of annual reports that detail planned capital expenditures for the year ahead showed that 14 of the 18 companies examined are ramping up spending.
As the largest apparel merchants, Amazon and Walmart Inc. are on the list, but are really outliers — dominating like they do in the world of e-commerce and, in Walmart’s case, brick-and-mortar stores.
Together, the two leaders plan to spend more than $100 billion on capex this year, plowing more funds into a future that is not just bigger in terms of scale, but more digitally empowered.
Amazon plowed 12.2 percent of its sales into capex last year and plans to spend more this year, and while much of that goes toward beefing up its lucrative web services cloud business, it offers a useful point of comparison. The rest of the list spent just 3.5 percent of sales on what accountants refer to as “property, plant and equipment.”
And some of the weakest companies in the industry are cutting back on their spending.
Kohl’s Corp., for instance, is cutting its capex to a range of $400 million to $425 million, down from $466 million last year, a decline of 11.5 percent at the midpoint. There is some nuance — Kohl’s just came off a stretch where it ramped up spending to roll out Sephora shops-in-shop — but the company is also deep in a turnaround effort and has plenty of areas that could use some TLC.
Sonia Lapinsky, leader of fashion retail at AlixPartners, compared capex spending to the wealth divide in the broader economy.
“The big companies are like the billionaires,” she said. “They just keep getting more and more advantages, are able to spend and get so far ahead.”
That competition — everybody’s competing with Amazon and Walmart one way or another — makes it all the more important for everybody else in the business of making and selling fashion to be careful of where they put their money.
The problem is, there are so many places to spend — and catch up, since so many fashion players like to be fast followers instead of pioneers.
“We often go into retailers and their systems are old and insufficient and they’ve been kind of patched together for so many years,” Lapinsky said. “A lot of it is just an upgrade. At some point they have to upgrade a lot of that technology infrastructure. So they might have low tech costs, but they’re really just delaying the inevitable. We call it tech debt.”
Likewise, retailers and brands also deemphasized their physical stores over the pandemic and are still playing catch-up.
“It’s 2025, and we’re finally realizing that people actually do want to shop in stores again,” Lapinsky said. “Retailers took all the cost out of stores when they shut them down. They kind of got used to this low level of both expense and cost. Now it’s almost like store debt. The same thing. The stores are needing some facelifts and upgrades and the consumer’s demanding a better experience.”
While the buck always stops with the chief executive officer, the matter of capex really does land squarely on the corner-office desk.
CEOs at large companies shape strategy and “sell” investors on the promise of future growth, but at the core, their job is to allocate resources, dedicating money and people to a problem or plan.
“You’re having every leader — the head of stores, the head of marketing, digital product — all coming to you with all of these investment requirements and telling you that they’re the most important and the most critical,” Lapinsky said. “How does that leader assess and trade off where they’re going to put their dollars, what’s going to give them the biggest bang for their buck?”
That’s a question all the more pressing now that artificial intelligence is at the center of not just the cultural conversation, but the investment conversation in business.
“We’re going to see a kind of a shift in the retail CEO over the coming years, because the skillset is just different,” Lapinsky said. “And those that don’t kind of embrace this and either learn what questions to ask and how to put the right people around themselves, I think are going to really fall short.”
AI is set to get more and more investment, even though companies are still trying to figure out just how to effectively put that money to work.
“What we’ve seen over the last couple of years is everybody’s dabbling in AI,” said Nora Kleinewillinghoefer, who leads luxury and fashion in the consumer practice of Kearney. “If you’re not dabbling in AI today, you’re not keeping up with the market.”
That dabbling has CEOs thinking bigger and bigger.
“What we’re seeing the shift in now is brands meaningfully reimagining the future of work,” Kleinewillinghoefer said. “So we’re talking everything from concept through the product design, merchandising and planning functions. Some of those naturally lend themselves more towards automation.”
Likewise, brands are planning to use AI to aid in design, connect with consumers and more.
“It’s not just automate the task here or get some good insights over there,” she said. “It’s about really rethinking the role of those individuals. What is the merchant of the future doing? How are they scenario planning? How are they looking at data sources in a much more meaningful way?”
Getting all of that right requires the kind of leadership that money really can’t buy.
