NEW YORK — The road from the trading floors of Wall Street to the showrooms of Seventh Avenue is paved with markdowns, but the fallout could also help the upscale sector turn the corner.

Executives at designer firms said the connection between the corporate accounting scandals and the spending habits of the high-end customer can be found in sale signs and clearance racks, where the value of designer merchandise can turn as quickly as a revised earnings statement.

A shopper walking into any number of high-end stores in Manhattan today — Jeffrey New York, Bergdorf Goodman, Barneys New York or Saks Fifth Avenue — will find racks filled with $1,100 Helmut Lang spring windbreakers and $120 Jil Sander T-shirts marked down by at least 50 percent next to early fall arrivals with their unblemished new price tags. The tony designer flagships along Madison and Fifth Avenues are running similar promotions, although more discreetly, where new merchandise arriving in stores this month is destined to then face a similar price paring within a matter of weeks.

As the life cycle of full-priced merchandise has been reduced from the industry’s old standard of 20 weeks to as few as eight, as some vendors pointed out, it has become a matter of practicality for consumers to shop with a calculator as it is with a credit card.

But as shoppers have become accustomed to the sale cycle, particularly within the past two years when price cuts have come faster and deeper, the markdown panic button has become a factor with which more designers have learned to cope, including those who compete with department stores with their own retail networks.

In some cases, they’re even finding some benefits by adjusting to the seemingly constant threat of discounted designer goods with frequent, often monthly, deliveries that are leaner in scope than the old-school model of basing a year’s success on bulk spring and fall shipments to stores. This often produced a glut of unattractive, cluttered merchandise that wouldn’t sell at any price, then resulted in even less appealing chargebacks to the vendors.

The new thinking along Seventh Avenue, which has quickly become evident in the merchandising strategies of several designer and bridge-price apparel companies over the past year, has largely been necessitated by the dramatic slowdown in international travel and luxury goods spending after Sept. 11. With retailers taking a decidedly conservative approach to their designer buys for the past two seasons, scaling down the collections has become a matter of survival for many manufacturers.While the immediate effects of the slowdown initially resulted in dismal forecasts for the high-end sector, some designers have found that the ultimately leaner retail display has actually encouraged full-price sales this spring, resulting in a better bottom line for the season than what they faced when the economy showed a surprising weakness a year ago. What’s left of the sale merchandise, while still plentiful, is also less disturbing than in recent seasons considering fewer sizes and styles are readily available.

So during a critical period when the first fall deliveries hit the selling floor, the forecast for the remainder of 2002 isn’t all roses, but it’s a lot better than many designers would have earlier predicted.

"The reality of the business climate today is that one has to react to markdowns," said Michael Pellegrino, president of Anna Sui.

The designer firm has broadened its mix in recent seasons to include a wider range of denim washes and individualized T-shirts that would appeal to more customers than Sui’s more expensive fringed suede jackets and playful print dresses.

"The customer today is conditioned to look for sales," he said. "I don’t consider that to be damaging if the merchandise is promoted in the right way. If certain price points of designer names are unaffordable to a certain customer, they realize there is that opportunity on a promotional basis to get a dress or a jacket that would not necessarily be affordable to them. Everyone’s business, as is ours, is based on knowing that is a reality of business."

Diversification has become a critical strategy for designer businesses, not only in merchandise, but also distribution. Marc Jacobs and Michael Kors recently opened flagships in Japan, for instance — part of a giant rush among designer firms to expand their businesses throughout Asia, a region viewed as having the potential to eventually rival domestic U.S. designer sales.

Pellegrino also cited Sui’s Asian business, where the designer holds several retail and manufacturing licenses, as contributing to the overall health of the brand, but he also said the company is getting closer to determining a partner to build its jeans business, having examined the businesses of various denim manufacturers for the past two years. Based on the strong critical reaction to Sui’s spring and fall shows for this year, the business is beyond its plan by 10 to 15 percent, he said."All the leaner inventories also gave us a chance to catch up with our deliveries," added Cynthia Rowley. "There’s hardly any inventory left over on anything. For me, that’s a much better way to run my business. We’ve been cutting closer to order and not stocking so much even for our own stores and in that way, you don’t have this huge liability at the end of the season."

Ultimately, the changes taking place in many designer collections are designed to combat the stigma of markdowns and frequent complaints of "sameness" between collections that has plagued both the bridge and luxury segments for the past decade.

"One of the things we are trying to do is to have more of a cycle of deliveries made up of cohesive groups," said a spokeswoman for Donna Karan. "We are trying to create a cycle of deliveries on a regular basis, so that when a customer comes into the boutique, it feels very fresh and is meaningful. We are also encouraging stores to buy deeper into the key silhouettes and we are planning more in-store and out-of-store events, whether it’s a cocktail party or a breakfast, so we can be more personal and in-touch with the customer."

Designers are similarly in constant communication with their accounts, reviewing weekly updates on best (and worst) sellers.

"This enables us to react and insure that the stores are in the best stock positions to capitalize on our business," said a spokeswoman for Michael Kors.

"In addition, our fall trunk show sales have exceeded plans, therefore another indication of strong sales," she said. "We believe that the designer customer is anxious to shop this fall season, as last fall was greatly affected by the events of 9/11."

"We’ve gone back to basics," added Caryn Lerner, co-president and chief marketing officer of Escada. "We are focused on the details and we are 100 percent focused on our customers. Anyone who walks into our stores, or a Saks or Neiman’s Escada boutique, we’re going to hug them. There’s not a lot of confidence out there with the consumer, with all the bad news coming out of corporate America and that is contributing to making the luxury customer feel a little skittish and distracted."While the overall outlook remains depressed, Lerner said some categories have performed well and are expected to continue into fall, such as novelty denim, knits, leather separates and silk print blouses.

"Our inventories are certainly leaner and trimmer," Lerner said. "We’ve cut our buys back for fall and worked with our wholesale partners so that our inventories going in are flat. We didn’t see the full-price sell-throughs we would have liked for spring, so it’s good that we have cut back inventories or we would be facing a bigger problem."

Tse is also placing a greater effort on marketing directly to the customer, said Rebecca Shafer, a creative consultant with the brand. For fall, the company produced its first catalog for its retail stores and also introduced a coat collection targeted at department store coat areas.

"We cannot wait for the recession to pass, but rather innovate ourselves out of the recession," she said.

At the opening price point of the designer market, sales have been fairly robust for spring and summer, although the rebound many vendors had hoped would come for fall still appears to be slower than expected.

"Everybody is waiting for corporate America to rebuild the confidence of consumers," said Gordon Finkelstein, president of Tocca. "We’ve really had to go to great lengths to edit the package by offering a smaller array that is more understandable, and we’ve made great strides in production to get the product to stores earlier. We’re also working with retailers like Saks and Barneys more on co-op advertising."

Finkelstein also said the markdown factor has conditioned consumers to expect a sale is coming, but added that they are also beginning to anticipate the deliveries of new merchandise at the same time.

"Visually, I hate it," he said of the mixing of sale and new product. "If the whole floor is packed with sales racks, it detracts tremendously from the new merchandise, which we saw last spring. I’ve seen less of it lately because stores have tightened up on their inventories over the past 12 months and that has helped a lot."

While such maneuvers might sound like basic merchandising theory, they represent a significant change in the way apparel businesses are operated today.Elie Tahari, for instance, was a pioneer in the bridge apparel category three decades ago, but recently overhauled his collection to focus on a developing "modern" category, which incorporates more designer elements at lower prices. Only half his sales now come from fall and spring collections, while the rest is based in reacting to hot items quickly with new production as well as the introduction of new items each month.

"I am working in a completely different direction," Tahari said. "And for the past year, our business has never been better. We’re not selling that much on sale. I’m making a 100 percent improvement on full-price merchandise on less inventory than last year."

Jeff Mahshie, creative director of the bridge label Chaiken, added that full-price sell-throughs have been on an incline???, noting that the brand received several reorders for June merchandise.

"I was surprised to see so many holiday and resort dollars in already," he said. "Everyone was anxious to get out of the spring season. Most of that merchandise seems to be gone and now it’s full-priced fall goods in the store. Since the cycle gets shorter and shorter every year — first 20 weeks, then 16, then 12 and now eight weeks — we’re waiting to see what the situation will be for fall, but we’re also encouraging full-price sales with in-store clinics and look books to educate the sales staff about our product as quickly as possible."

Smaller brands have focused their sells to specialty store accounts, which historically have resisted markdowns by differentiating their product mix from large department stores. The German brand Strenesse has made inroads into the U.S. market through this channel to concentrate on full-price sales, said Deb Maxwell, president and chief executive officer of Strenesse USA.

"We’ve started fall deliveries and small stores are already calling in reorders, but larger stores aren’t having the same reaction because of the markdown situation," she said. "Just as the summer customer was really starting to respond, the product went on sale. I generally feel the panic factor in some of these larger, more urban stores is entirely unnecesary.

"Now the consumer has grown to expect it and that’s a very hard thing to reverse. Rarely would an advance customer be interested in shopping in that environment and when your fall customer is staying away from that madness, it becomes a catch-22."Bridge label Mondi is also reporting strong fall bookings based on recent trunk shows, such as a two-day event in El Paso, Tex., at Tres Mariposas that netted sales of $110,000, following a successful spring season at accounts like Daniel Foxx in Palm Desert, Calif., said Skender Perolli, president and ceo of Begali Brands. The firm holds exclusive distribution rights of Mondi branded products for the Western Hemisphere.

"In the beginning, the fall was very shaky because there is still a lot of nervousness from the prior year," he said. "But lately, things are turning around and consumer confidence is there. You have to be there for your customer in promoting the product and by doing something that wasn’t there in past. It blemishes the image of the product if it’s marked down immediately, but I think it’s a temporary situation and we’ll get over that. We’re still experiencing the toxic effects of Sept. 11."

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