NEW YORK — Department stores are revamping their moderate-priced merchandise offerings, in what should be a pivotal season for the depressed category.
This story first appeared in the August 21, 2002 issue of WWD. Subscribe Today.
It’s not quite an upheaval, nor are department stores ready yet to give the heave-ho to many of the traditional brands they’ve sold for decades. But they’ve become increasingly disillusioned by what manufacturers have been offering and are starved for top-line growth.
So they’re reducing inventory on brands that aren’t performing and building up private labels to take up the slack, while squeezing a few newer and smaller promising brands onto crowded selling floors, and emphasizing casual styles.
The moderate sector, the heart of which lies in the $20 to $30 range for sportswear and sweaters, and in the $40 range for career pieces, has suffered from a lack of style and innovation, and sell at thin margins. Only men’s wear and dresses have fared worse in recent seasons, according to department store executives.
Even without much fashion glitter as of late, the moderate sector remains the major component of apparel offerings at such traditional stores as Dillard’s, Belk’s, J.C. Penney Co., Sears, and divisions of Federated Department Stores, including Macy’s East and West, Bon Marché, Rich’s and Burdine’s, and May Department Stores Co.’s Hecht’s, Filene’s, Famous Barr, Foley’s and Robinson’s-May units.
The success behind Kohl’s, a non-traditional department store, rests in savvy and aggressive promotion of major moderate-priced brands such as Union Bay, LEI, Mudd and Levi’s.
Perhaps more than any other major department store chain, May Co. is a headquarters for moderate merchandise and knows what the moderate customer wants.
“They’re clamoring for more style,” said William P. McNamara, vice chairman of May Co. “Moderate is not synonymous with basic. There is a great thirst for innovation and newness in the moderate business. There is definitely not enough of that.”
McNamara pointed out that last spring there were some successes, including cropped pants, skirts, stretch fabrics and feminine touches in tops, such as ruffles.
However, in terms of sales increases, he said moderate “has trended behind our better and designer businesses.” Though sluggish, the moderate sector is no less significant.
“It certainly has not been overplayed,” McNamara said. “We are disappointed in the moderate results, but the moderate business is very, very important to May Co., as we see customers become more value-conscious across the retail landscape. Competing effectively at the moderate price has been, and always will be, an important business to us.
“We think the way for us to compete is to trade across a broad range of customers. It will stabilize. Our objective is for the moderate business to continue to grow at the same rate of the total sportswear business. Total growth has been in the low-single digits for this year.”
At Federated’s Macy’s East division, “The problem is that the market has not been providing updated dressing and key silhouettes in the moderate zone,” said Bob Jezowski, executive vice president and general merchandise manager. “Some of the old, traditional vendors have not performed as well, so private label has been a good avenue to execute our trend strategy.”
According to Tactical Retail Solutions, a research and consulting firm, moderate sportswear represents about 9 to 10 percent of a typical department store’s business, with moderate-priced petites accounting for an additional 2 percent, moderate-priced large sizes accounting for another 2 percent, and moderate dresses, approximately 1 percent. Moderate sportswear is about 60 percent of total sportswear, and has been selling at a rate of about $200 per square foot, whereas the average department store has total sales per square foot of about $220.
“It’s an important business that’s been trending soft, though it turns moderately well, roughly 3 1/2 to 4 times a year,” said Isaac Lagnado, president of Tactical Retail Solutions.
For big retailers, the fall season could be pivotal, as they introduce new proprietary labels, weed out the weaker ones, try to capture a younger audience and retain the market they already have. As May’s McNamara indicated, customers increasingly seek value and good pricing, underscoring the importance of being well stocked in moderate.
Retail executives complain they haven’t been getting that much newness from the market, so in some cases, they’re turning to their own product development organizations and merchandisers.
At May, for example, a major addition on the moderate side is the introduction of the I.E. proprietary brand, which will emphasize tailored and casual related separates, day-into-evening outfits and denim, targeted for the 35-year-old.
However, May’s largest volume moderate in-house brand is Karen Scott, which offers casual and tailored looks throughout the year, and is geared to a customer aged 45 and older. May also sells Amanda Smith, which also targets middle-aged women, but not as old as Karen Scott and more focused on tailored clothes. The in-house brand is being trended down, according to May Co., but McNamara stressed the line is not being discontinued.
Still, with the buildup in proprietary brands, something’s got to give. As May’s chairman and chief executive officer Gene Kahn recently said, “Amanda Smith [a May Co. private label for tailored sportswear] is being trended down, but the major loss of business will be of nationally distributed brands that [our stores] all carry.” He declined to specify.
“We are really trying to present more newness and fashion and show customers how to put these outfits together,” McNamara said. “That will be a very large focus. There is an opportunity for us with younger customers. We are searching for the brands that will serve that customer at both the better and moderate price levels, but we will continue to serve younger and mature customers, with branded and proprietary brands.”
At Macy’s East, “We have really changed the mix,” Jezowski said. “We’re trying to be more updated and trend driven than old basic slacks and skirts. We were happy with the results for spring, where there was a major shift to much more casual, weekend and active-inspired looks. For early fall, sweaters have been very good and denim looks promising,” particularly with novelty jeans.
Macy’s East is also putting greater emphasis on its private label Style & Co., for career and casual looks, and its Jennifer Moore Collection for novelty, decorated related separates. Jezowski did cite some emerging vendors, including Caribbean Joe, for casual tops and bottoms with denim; John Paul Richard, for updated sportswear, and DCC in woven shirts and peasant blouses.
Generally, classifications businesses — woven shirts, twill bottoms, updated blouses — have done well, Jezowski added. Regarding moderate overall, he said, “It’s been underplayed. Women, old and young, want to look fashionable and not pay a lot of money for it. The key is to grow fast. We really have got to push it faster.”
At Sears, the biggest moderate brand is Apostrophe, a proprietary label, but it is expected that the Covington store brand, introduced for this fall, will surpass Apostrophe in volume. Covington is projected at $200 million in sales its first year.
“On the moderate level, these are two brands that we are fully backing,” said a Sears spokeswoman. “Apostrophe does well because of its newness and because it is right on trend. The label provides things customers don’t already have. Every month, we are getting new things in for Apostrophe.
“We continue to grow the sku’s and volume on Apostrophe apparel because it is so much on trend,” having recently featured lots of romantic influences, more feminine detailing, and peasant and ruffle looks, she said. Stretch separates, updated suiting styles with two-way stretch are among the best sellers.
Covington officially launches Sept. 8, but has been in Sears stores for awhile.
“We are seeing some great sales already,” the spokeswoman said. “People are very interested in new classic apparel, particularly denim, denim skirts and woven shirts with a bit of Lycra.”
Sears has said that by the end of the year, a total of 142 labels in apparel and soft home goods will be discontinued. While streamlining the array, Sears is looking to the moderate market to cater better to the large Black, Hispanic and urban populations to which it sells. For example, the Covington fashion look book, the first look book produced by Sears, has African-American, Hispanic, Caucasian and Asian models, reflecting efforts to appeal to minorities.
Covington is coming out of the ether with more than 100 sku’s. To develop the brand, Sears relied on focus groups and close examination of the competition, aiming to up the ante in terms of quality and fit, while keeping prices low. The company has said it did exhaustive testing on denim strengths, thread counts and washability.
As reported, Covington is 100 percent sourced and designed by Sears, and replaces eight private labels, including Trader Bay, Crossroads and Fieldmaster. Covington is being situated just off mall entrances, where the Circle of Beauty cosmetics areas once stood, though Covington shoes will be in the shoe area, and Covington men’s wear will be positioned by classification.
J.C. Penney Co. remains committed to its five-year turnaround plan, now in its second year, that includes overhauling the 1,068-unit chain’s inventory and replenishment systems and refocusing its fashion vision to offer trendier styles on a more timely basis.
Juniors and women’s, including special sizes, remain among Penney’s strongest categories. Penney’s powerhouse private label lineup, including St. John’s Bay, Hunt Club, Arizona and Worthington, are being repositioned as lifestyle brands with expanded offerings to appeal to its target customers, who have yearly family incomes of between $35,000 to $80,000.
Elder-Beerman, the 67-unit moderate chain based in Dayton, Ohio, which had 2001 sales of $673.5 million, continues to roll out new stores that follow its updated concept store design unveiled in 1999 that focuses on moderate merchandise and a faster shopping experience.
The stores average about 55,000 square feet. There are currently about 10 stores that follow the new prototype. The traditional style stores range in size from 40,700 square feet to 217,000 square feet, with an average size of about 75,000 square feet.
The company is developing updated key-item fashion assortments that offer younger, trendier separates across all size ranges, with updated basic denim and active wear a big push for fall.
At Federated’s Macy’s West unit, private labels Charter Club, Style & Co., and JM by Jennifer Moore are performing best in the moderate category, according to Sally Katz, vice president and deputy merchandising manager for moderate and swim for the chain’s 139 doors.
“In career, we expect a resurgence in suited looks, with wovens and cut-and-sew knits replacing the key-item sweater business,” she said. “Soft dressing is more feminine, with lots of trim and details. In casual, the update zone is all about fashion denim, with knit and woven novelty tops.”
Katz added that onion skin and triple mesh tops are doing particularly well in both bohemian and feminine looks, as are new treatments in denim bottoms. Updated separates and yoga looks are revving up the casual active category.
“We expect the key item commodity business to be flat, with novelty cottons replacing last year’s sweater coats,” she said. “Offering the customer more fashion at compelling prices is key.”
At Target Corp.’s Mervyn’s division, the moderate customer is drawn more to simple clothes than “aggressive” new looks, according to Chris Daniel, vice president of product and development for the fleet of 264 stores. Clothes in the category are acting as a backdrop to accessories, arguably the strongest area in moderate.
“It’s a little bit of the question ‘What’s the dog and what’s the tail,’” he said. “I definitely think we have to sell the clothes, but there’s so much interest in belts, waist treatments, wraps and sashes.”
Aside from accessories, Mervyn’s will market career wear strongly to the moderate customer.
“There hasn’t been a lot of newness and now there’s interest in jackets, so many great new blazers and collars,” Daniel said. “It’s really going to be a shot in the arm.”
Moderate buyers have not widely bought into tight and low-waisted styles and Daniel is confident that consumers will respond to less-body-conscious silhouettes like tunics and fuller skirts. He said, “I think when retailers offer comfortable, pretty wearable and understandable clothes, it sells.”