NEW YORK--March was a harsh month for women's apparel, but retailers are not panicking. Not yet.
Still, the dismal sales results released last week are viewed by some observers as a harbinger of early and aggressive markdowns, beginning in the next two weeks.
While inventories in some cases are in danger of bloating, many retailers now say they had modest expectations for the season and planned accordingly.
Even modest expectations, however, haven't been modest enough so far, and unless there's a last-minute Easter boom, reorders could dry up and put manufacturers in the difficult position of deciding where to unload spring goods.
Not everyone was lukewarm going into the season. Many, particularly in the designer and bridge markets, had high hopes that a return to fit and glamour would make last December's disappointment a distant memory.
Others note that the spring selling season is far from over and could still rally.
"The March business did not build the way we thought it would," said Janet Joseph Kloppenburg, a retail analyst at Robertson Stephens & Co. "People expected it to be better than it was. There's a lot of new fashion out there, especially the form-fitting stuff, that they thought would make the season. It hasn't.
"You'll see people break price earlier than expected on the collections and bridge and see markdowns come in higher than expected," Kloppenburg said. "Then, manufacturers will have to come up with some kind of markdown allowance, and that will hurt their earnings, as well."
"Inventory levels are definitely up from last year because there is the expectation that sales are going to come through," said Janet Mangano, a retail analyst at Burnham Securities. "The retailers don't have much to worry about until we get to the third or fourth week of April. I get the sense that they planned realistically, but the sales to date have been softer than even their modest expectations.
"Overall there's been lackluster sales," Mangano said. "The markdowns will start happening by the week of April 22. The retailers have been sharpening their pencils, but even as they do that, they are still shy of plan."
Some stores, like Saks Fifth Avenue and J.C. Penney, said their inventories are in good shape.
"We have been very aggressive about monitoring our inventory flow," said Philip Miller, chairman and chief executive officer of Saks. "We have had excellent results in keeping our inventories at the levels they need to be, commensurate with business expectations. In February and March, we exceeded plan. We had a very much improved margin performance for first quarter of 1995 in recent years."
At Theodore, a six-unit chain in Los Angeles, inventories are at their best level in three years, although deliveries of spring merchandise from European designers are later than usual, said owner Herb Fink.
Fink said inventories have improved because the company closed lackluster stores and has shaken up the designer mix to emphasize casual clothes.
"We've gotten rid of all the embellishments and seriousness," he said, adding that volume in March and the first week of April was up more than 10 percent over last year.
"Clean and well positioned" is how a spokesman for J.C. Penney & Co. described the retailer's inventory levels, despite analyst reports to the contrary and a March store-for-store sales decline of 5.5 percent.
"Last week, our sales were on plan in both stores and catalog," the Penney's spokesman said. "All divisions' sales were strong, led by children's and shoes. We were expecting a good April, and it's starting off on plan," he added.
But other retailers are beginning to feel some anxiety as the all-important Easter holiday --which is expected to rescue the season--approaches.
Southwest manufacturers said they're keeping a cautious eye on inventory levels in light of the tough retail climate.
At Jerell Inc., Dallas, inventories are about 5 percent higher than they were last year, said Ed Vierling, president and ceo of the dress and sportswear house.
"Overall, our inventories are very light," Vierling said. "Major stores, though, are absolutely buying closer to need because the name of the game is turn. The margins today on the maker side are the tightest they've ever been. You walk a very tight rope between margin and excessive inventory. We sleep with one eye open at all times--the one thing that can hurt an operation of our size is excessive inventory."
Mike Ferguson, chief executive offerer at Focus Apparel, Dallas, a dress and sportswear firm, said inventories are even with last year. However, Ferguson said, he's recently noticed an increasing amount of cancellations.
"Business is getting tougher at the retail level," he said. "I think a lot of the specialty stores are having problems. When business is bad, they have problems paying."
Talbots, a specialty chain, said inventories are higher this spring than last, but attributed the increase to better-than-expected March business and expectations of a good April. Talbots, as reported, had a 3.4 percent increase in same-store sales in March.
"In terms of inventory levels, the inventories are up at about the same level that our sales are up," Arnold Zetcher, president and ceo said in an interview.
Talbots began its midseason sale in late March on "virtually the identical" day as it did a year ago, he said. Talbots has planned for April sales "above the trends" of February and March.
At Conway, Jeff Cohen, senior vice president, said inventory levels are in "pretty good shape" for the company's 18 stores, but vendors appear to be heavy in ready-to-ship stock.
"There are a lot of goods out there," he said. "We're getting calls left and right, and we've been sitting tight."
Cohen said when vendors saw last week that Wal-Mart Stores reported a lackluster 2.8 percent same-store sales increase for March, and other industry leaders slowing down, they became concerned about reorders.
"Anybody with inventory in their place who hasn't shipped is anxious to get rid of it," he said.
Cohen said Conway has been hesitant to "sink its teeth into anything" because it isn't seeing any real fashion direction.
"We're sort of sitting tight until after Easter," he said. "At that point, we'll probably go out and do some buying, but we've been playing it pretty close to the vest."
Several manufacturers said they haven't been stuck with inventory buildups because they were prepared for a tough early spring.
"We've been taking a conservative stance on inventories for the past 12 months, and so our inventories are under control," said Jay Levtow, president of Counterparts, an updated separates sportswear firm. "We are aware that business has been slow at retail for the spring, and we heard that stores have been forced to reduce future orders because of disappointing March sales, but we haven't been affected."
"We saw early on that the early spring business was going to be soft, and it concerned us," said Barry Cohen, vice president at Ellen Figg, a sportswear firm. "We decided not to have as much hanging inventory in our warehouse. Instead, we are cutting to order. I think the people that are having the inventory buildup problem are importers; they have to plan their orders so far in advance and they just don't have a crystal ball."
Bud Konheim, president of Nicole Miller, would rather run out of goods--as the company did when it recently missed shipping a $1.6 million order because it didn't make enough product--than be saddled with excess inventory.
"The trick is to produce what the demand is exactly," Konheim said. "The next best thing is to undersupply. We stopped trying to push sales in an environment where there was too much to buy anyway. Somebody's got to stop making things. If we make people want things by design, then we make inventory into an asset.
"One of the secrets of running a low inventory is manufacturing the product one block from our office," Konheim said. "We have cut the same style six times in one month. We test, then we reorder. Our inventory is very slim and tight."
Robert Buchanan, an analyst at NatWest Securities, said he has visited a number of stores recently, and last week they finally began to look cleaned out of fall-winter goods and ready for spring-summer merchandise.
"I don't think we're going to have any massive inventory problem this spring along the lines of what we had after the last holiday," he said. "It looks to me like the stores are finally clean, but it took them forever, given the weakness you had in women's apparel."
Buchanan said even with the fierce price cutting in January, some retailers were "still choking on goods at the end of February."
"It's just now that I've begun seeing most stores clean on their fall-winter goods," he added.
Still, Buchanan said, stores are buying cautiously and he expects "some heavy-duty discounting" in the second half of April as a result of the general weakness in March's retail sales.

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