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NEW YORK — A series of launches has stirred up better sportswear this year, but two industry stalwarts — Jones Apparel Group and Liz Claiborne Inc. — are still seen as significant players.
They are clearly the market leaders in girth. The various incarnations of the Liz Claiborne brand boast annual sales of some $1.4 billion, while Jones New York weighs in at $1 billion. Both companies also produce other brands at the better-price segment, such as City DKNY at Claiborne and AK Anne Klein at Jones.
“It continues to be the bedrock of this organization,” Jones’ president and chief executive officer Peter Boneparth said of the firm’s better-priced segment, during a conference call discussing third-quarter results last month. “There have been a lot of new entrants that have generated a lot of enthusiasm for the consumer, but I would say that the results from that competition were at best mixed.”
New entrants with better offerings in the department stores include H Hilfiger from Tommy Hilfiger Corp.; Calvin Klein, produced under license by Kellwood Co.; Michael Michael Kors, and Realities from Claiborne, as well as Jones New York Signature. While Claiborne and Jones have their roots in the better business, the Calvin Klein line, which has been well received, is Kellwood’s more recent move into the sector.
Some of the newcomers have turned in mixed results, as has been well documented and acknowledged by vendors for months.
Still, the new brands are a competitive challenge to the more established names such as Liz Claiborne and Jones New York.
“The pie is only so large and when a retailer has to evaluate their open-to-buys, they have to evaluate product and it’s going to come from somebody,” said Allan Ellinger, senior managing director at Marketing Management Group. “It seems that the new guard is eating away at the old guard.”
However, he added, “If the newer brands that came to the market don’t perform and aren’t fine-tuned quickly enough, than retailers may revert back to safe ground and the old guard brands.”
Hilfiger’s H had some trouble getting out of the gate for spring, while Realities also has had a rough start, the brands’ producers have acknowledged. Michael, which launched for fall, started out with shipping problems and has undergone management changes, according to the company. People familiar with the matter said the brand also trimmed 25 employees from the better line’s payroll last month.
Some vendors are now supporting their launches with markdown money for retailers, said Paul Charron, Claiborne’s chairman and ceo of Liz Claiborne, during his company’s quarterly conference call. This might only be a temporary fix, though.
“Retailers make tough choices much more quickly than they did in the past,” said Charron. “It is not enough to pass markdown money across the table so that they get the margin they intended. The issue with most of our retail partners, and I’m not just talking about department stores, is sales….They’re interested in satisfying the consumer, and the biggest result or indicator of a satisfied consumer is a sale.”
Consultant Emanuel Weintraub said, “I don’t believe that the market is big enough to support, in a high-volume way, all the major players that are there. This market is going to be very cruel to anyone who doesn’t perform well and, right now, Michael is the first one to really have a headache, it appears.”
The market has been somewhat tough overall with the consumer slow to take to department stores for fall. According to Goldman Sachs, same-store sales at department stores slid 0.9 percent in September and inched up 2.6 percent in October, against year-ago results. Most blame the lukewarm results on broad concerns, such as high fuel prices, slipping consumer confidence and uncertainty surrounding the election.
Jones missed its third-quarter profit projections, but grew wholesale revenues in better brands by 6 percent, with the help of $58 million from Signature, which has proven to be a successful launch. The line helped replace sales lost by the reversion of the Lauren by Ralph Lauren license back to Polo Ralph Lauren Corp. for spring. Polo is now producing the line itself. For the second quarter ended Oct. 2, Polo’s wholesale revenues shot up 49.5 percent to $502.6 million, driven in part by the Lauren line.
“Our biggest challenge is ensuring that we have the best locations and adequate square footage,” said Susan Metzger, group president of Jones New York.
The better area in department stores has taken some space from moderate, she said, though, “the stores aren’t getting any bigger.”
Price point also might be losing some ground as a rationalization for grouping certain brands together in the store.
“There has been the thought process of putting product that speaks to [the consumer’s] lifestyle and who she is as a person together,” said Metzger. “Right now, it’s a strategy that is being tested.”
Claiborne is starting to see some traction with its core Liz Claiborne brand. The label saw a 17.4 percent decrease in its domestic business during the third quarter, and earlier this year, consolidated under one master label. It’s slated for an increase in the fourth quarter, said the firm.
“We’re in a moment in time where the retailers need to settle in with the things they started in 2004,” said Trudy Sullivan, executive vice president at Claiborne.
Sullivan said the company also is developing new brands to capture additional growth. As with the other launches, though, creating a brand isn’t always an easy thing, even for a company of Claiborne’s size and experience.
“We have not found the formula for Realities,” admitted executive vice president Angela Ahrendts.
Realities lacks a high-profile brand name, one of the key attributes of brands in Claiborne’s better portfolio that have been able to resist the onslaught of newcomers, said Ahrendts. In addition to a brand with consumer recognition, she pointed to design integrity, consistent fit and a strong price-value ratio as vital to the success of the better brands.
For more images, see photo spread, A Better Tomorrow.