An abundance of new lines and a renewed interest in the category on the part of designers and department stores has made for a major shakeup on the better floor next year.
Although much is still to be worked out, industry estimates indicate a significant portion — perhaps a third — of the better space in major stores could be up for grabs. The changes begin to take hold in spring, and floor space for the season is being decided between merchants and vendors now.
“With some of the recent shifts in manufacturing, it’s opening up an opportunity for everybody to reevaluate their current structure,” said Kathy Bradley, merchandise manager for misses’ and junior sportswear at The Doneger Group buying and consulting firm.
Among the major dynamics affecting the segment is the transition of the Lauren by Ralph Lauren label back to Polo Ralph Lauren Corp. from Jones Apparel Group in June. Last year, the line, which anchored many better departments, pulled in sales of $548 million for Jones, which produced it under license.
Polo, though, is expecting the business to shrink some, at least at first, and pull in sales of $400 million in its first year, as reported. Additionally, Polo might have to prove it can execute the Lauren line as consistently as Jones did, sources said.
This left what Seventh Avenue likes to call a market “opportunity” or “void” that many firms are vying to fill. The change prompted Jones to extend its namesake brand with Jones New York Signature and instigated Liz Claiborne Inc.’s move to speed up the launch its new line, Realities. Other players also are looking to take advantage of the transition, including Kellwood Co. with a lower-priced Calvin Klein line, and Tommy Hilfiger Corp. with its revamped H collection.
Next year also will see better offerings from the designer set with Michael Kors, while Marc Jacobs contemplates the segment, as well.
“We’ll really see how it all shakes out, who rises to the top and who doesn’t, and by 2005 the better landscape will look much different than it looks now,” said Bradley, who predicted 2004 would be “a learning and experimental year.”It turns out, though, that the department stores were due for a change and the Lauren transfer, which has become a litigious affair, was simply the spark. Chains such as Kohl’s and J.C. Penney have been increasingly pressuring more traditional department stores with increased competition for sales of more moderately priced goods.
Department stores also are struggling to differentiate themselves not only from the national chains, but from each other, and a slew of new and remodeled offerings at prices out of the reach of their lower-tiered competition could be the answer.
“The better business has been very difficult and very challenging,” said Bradley, noting the current climate is “allowing us to dissect [the business] and hopefully come up with a better formula.”
All of the movement in better, though, has spurred pointed competition.
Although Bloomingdale’s is buying into the new lines, the retailer won’t be expanding its better floor space, said executive vice president Frank Doroff.
“We’re going to try to make it more productive with all the new competition,” he said. “We’re going to try to edit and maximize the productivity of our floor.”
That editing means some lines will be pulled, but wouldn’t necessarily exit Bloomingdale’s, as the decisions will be made on a store-by-store basis. While the showroom offers one view of a line, ideally with its best foot forward, he noted, “it’s hard to predict how everybody’s going to execute.” How smoothly the lines roll out could be indicative of how attractive they are to stores going forward.
“It remains to be seen if the pie’s going to be bigger with all these new lines or if it’s just going to get carved up differently,” Doroff said. “Newness never hurts — there’s a reason for customers to come back and shop and look.”
While the bar is going to be raised for new lines, Doroff said Lauren was “outstanding” and his team reacted positively to Realities. Bloomingdale’s is also buying the new Calvin Klein line, as well as Signature and H.
Retail consultant Walter Loeb noted, “There is a tremendous need to upgrade and establish department stores as upscale stores. Manufacturers are sensing that business is going to take a new direction upward.”Stores can cut costs and increase productivity to improve performance, but that strategy has its limits, he said.
“At one point or another you have to get more business into the store because you’re not going to meet operating expenses if you don’t,” Loeb said. “The present customer base is bored.”
Angela Ahrendts, executive vice president of Claiborne, said of the better floor space, “Some of it’s a given. It’s not like the whole thing is flipping over.”
She estimated 20 to 30 percent of the better floor space could change hands.
Retailers are taking “a wait-and-see approach,” Ahrendts said. “It’s survival of the fittest. You’ll still have a handful of megabrands, but it’s not like everybody’s trying to be a megabrand. You might end up seeing all of these launches survive, but doing different things for different stores. I don’t think any store will go in and buy every one of them.”
Stephen Ruzow, president of Kellwood women’s wear, agreed the fight for space on the better floor is fierce.
Calvin Klein women’s better, though, is easing its way into the pool. The line is licensed to Kellwood, which partnered with GAV for greater design credentials.
“We’re going to be very limited on Calvin,” said Ruzow. “We’re only going to put it into about 150 doors and want to be in the best two stores in the mall, the stores that have the ability to really sell it at full price.”
In addition to the giants of the apparel world, moderate-sized firms also are zeroing in on better for the spring and aren’t planning on giving up their ground. Perry Ellis women’s, which was relaunched by licensee Public Clothing Co. this past spring, has tapped designer Patrick Robinson for its spring collection.
Elissa Skala Bromer, president of Perry Ellis women’s wear, at the presentation of the line Friday in Bryant Park, noted of the collection: “It’s a real turnaround for us. It’s putting a stake in the ground and making us a player in better.”Public Clothing plans to grow Perry Ellis women’s into a $50 million business next year.
The increased competition and newness in better could be just what the department stores need to create consumer excitement.
“It’s about time,” said Smith Barney broadlines equity analyst Deborah Weinswig. “As we start to see new product that you can’t buy at Kohl’s or Penney’s or Wal-Mart, I think the department stores will become destinations again.”
Private label programs also are helping department stores set themselves apart, which, together with better sportswear, could be “very effective” in helping turn things around, said Weinswig.
“Everyone assumed department stores were dead,” she said. “I just don’t think that’s the case. They are coming back to life.”
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