Calvin Klein NYC Closure Highlights Risks Of Unprofitable Flagship Stores

Calvin Klein is closing its Madison Avenue flagship store in New York City this spring as the company restructures its North America division. While internal considerations — Calvin Klein’s consolidation of its men’s sportswear and jeans departments, and the integration of separate retail and e-Commerce teams — motivated the retailer’s decision, the flagship closure is yet another sign that major retailers need to rethink how they assess the contributions that these high-visibility stores make to the brand.

Even though flagships are generally designed to bring the brand to as wide an audience as possible, with profitability not always the main goal, the exposure doesn’t always provide enough financial benefit to outweigh expenses if they don’t generate sufficient sales.

“I’d say that in all of these cases, the retailers concerned did not have a strong enough proposition to support the economics of a large flagship store,” said Neil Saunders, Managing Director of GlobalData Retail in a RetailWire discussion. “Gap’s, in particular, was simply a big version of any other Gap store. A flagship is expensive, especially in a city such as New York. That means it has to generate significant volume, play a role in driving the brand and sales through other channels, or both. If it doesn’t do these things, there is little point in having it.”