By  on May 23, 2005

NEW YORK — There can be too much of a good thing — perhaps even for denim.

Fashion trends generally flow in three-year cycles, but a lot can happen to shorten that life span. The most common and damaging is overexposure. Think of any designer handbag or runway craze whose facsimile turned up in the windows of Express, Zara and H&M a few months later.

"If everybody makes the same bet, you'll have a sea of sameness, where everybody's window is full of denim," said Andy Graves, senior analyst at Pacific Growth Equities, referring to the high denim inventories some retailers have planned for fall. "That could cause backlash and buyer confusion. If the Gap doesn't hit its sales targets, the stores will start to mark down, and you'll get a discounting cycle. That's the risk."

Even as retailers increase denim orders for back-to-school, at least two Wall Street analysts have raised concerns that by fall there may be too much denim chasing too few customers.

Stacy Pak, a Prudential retail analyst, downgraded three retail stocks Friday — American Eagle Outfitters, Abercrombie & Fitch and Pacific Sunwear of California — to "underweight" from "neutral."

"Our sense is that denim for the industry continues to be strong, but we also feel a glut brewing as retailer after retailer talks about the larger denim investment and higher prices they are planning on that denim," Pak wrote in a research note.

Jeffrey Klinefelter, a senior research analyst at Piper Jaffray, said the moderate denim space is getting crowded. "Although we are encouraged by American Eagle's decision to expand its already dominant denim assortment for back-to-school, we are concerned about the number of competitors who have witnessed AE's success and will be joining the denim fray in earnest this summer and fall," he wrote in a research note.

Klinefelter lowered American Eagle's rating from "outperform" to "perform."

Executives at A&F, American Eagle and PacSun did not return phone calls seeking comment.

On Friday, shares of American Eagle declined $1.07, to close at $26.64, and PacSun closed at $20.99, down 69 cents, both on the Nasdaq. A&F closed at $54.49, down 71 cents, on the New York Stock Exchange.

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