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Denim Market Hits Headwinds

A healthy, sustained dose of fashion innovation is necessary for market to reverse the stagnation that stalled business in 2010.

Appeared In
Special Issue
WWDStyle issue 02/16/2011

The denim market is going to require a healthy, sustained dose of fashion innovation if it’s to reverse the stagnation that stalled the business in 2010.

That is among the conclusions drawn from data released Tuesday by The NPD Group Inc., the Port Washington, N.Y.-based research firm. While overall sales of jeans for adults last year rose 0.4 percent to $13.82 billion from $13.77 billion in 2009, men’s jeans sales suffered their first decline in six years, falling 3.1 percent to $5.18 billion.

The larger women’s jeans category fared better, with sales rising 2.6 percent to $8.64 billion from $8.42 billion. But the women’s category benefited from the triple-digit growth of jeggings sales, much of it in the first half of the year. Sales of that style grew 214.4 percent to $271.3 million last year from $86.3 million in 2009.

Stripping out jeggings, overall jeans sales actually declined 1 percent to $13.55 billion, from $13.68 billion in the prior year, and the increase in women’s jeans sales was reduced to a mere 0.4 percent, to $8.37 billion.

But jeggings, while clearly not the solution to the denim market’s ills last year, were hardly the problem.

“Any business that kept innovation and technological advances in the forefront last year — from electronics and cars to footwear and accessories — kept the consumer engaged and did all right,” said Marshal Cohen, chief industry analyst for NPD. “Whether it was washes, finishes or silhouettes, denim had been all about innovation for a long time. But last year, there really wasn’t that much in the way of innovation in the denim business. You had jeggings and skinny jeans, but those are limited in their appeal — not everyone wanted to go out and get that skinny jean or those jeggings.”

Cohen feels the market is positioning itself for a turnaround now as it begins to focus on silhouettes with a broader appeal, such as the flare and the bell-bottom, and come to grips with the markedly shorter attention span of the average consumer.

“The recession dramatically changed the consumer’s willingness to focus on a given category,” he said. “The younger customer isn’t waiting to replace his cell phone. That used to be that way with jeans, but not anymore. Denim got ‘out-fashioned’ by other parts of the wardrobe and other classes of products. The denim market is good at making adjustments quickly and they’re ready to usher in a new generation of customers to trends like the flare and the bell.”

The popularity of jeggings became something of a double-edged sword for jeans customers, who had a convenient substitute standing by in the absence of any compelling denim trends and at a time when saving money was paramount in many consumers’ minds. That’s among the reasons that, even with sales up, the average price of women’s jeans dropped 2 percent last year, to $22.76 from $23.34. And the jump to jeggings also “added an element at the lower end of the market and detracted from the upper end,” according to Cohen.

Women’s jeans under $25, including much of the jeggings action, had a 5 percent sales increase, to $4.24 billion, and those between $25 and $49.99 were up 3.7 percent to $3.04 billion, but sales of jeans in the $50-and-up category, including the hard-hit but relatively small premium market, were off 6.4 percent, to $1.36 billion.

Men’s jeans at $50 and up weathered a sales decline of 17.3 percent to $621 million while jeans under $25 saw sales erode 5.5 percent to $2.28 billion. Sales in between these two price brackets rose 4.5 percent to $2.28 billion. More so than on the women’s side of the store, the relative strength of the midtier price points “is a direct reflection on men trading down from the upper end while maintaining their posture in the middle. The majority of men’s denim is worn for work and this customer often waits until he absolutely needs to buy.”

The average price of a pair of men’s jeans was unchanged last year, at $23.42.

Women were finding “a lot of high-priced denim in their closets and drawers already,” Cohen said. “This was destined to happen at some point and it was only a matter of when the fragile economy drove it a little bit faster.”

Denim executives have slowly come to accept that they were a bit too conservative in their approach to their merchandising last year as they struggled to cope with a thrifty consumer unmoved by fashion offerings.

“We didn’t have enough newness and innovation of product to drive to the level of sales we had last year,” said Marc Crossman, president and chief executive officer of Joe’s Jeans, “especially given that we were facing tough comps against last year’s successful jean legging.” Crossman made the comments on a conference call this month after the firm reported a 6.6 percent decline in fourth-quarter revenues to $23.6 million on a 96 percent contraction in net income.

Also contributing to denim’s relative softness last year was a tepid teen market. Teens, Cohen pointed out, wear 13 percent of the apparel sold, but only buy 7 percent. “The teen market gets hit twice — that customer is being wooed by other industries on one hand and, on the other, parents who want them to spend less and buy less often,” he said.

Retailers and their resources this year will be in the delicate position of trying to generate enthusiasm for a turnaround in jeans even as they’re pushing more expensive products courtesy of increases in raw materials and other costs.

“Price is going to be a polarizing issue,” Cohen said. The high end won’t balk at the price, but at middle and low ends, someone will break price, everyone will run in that direction and retailers will bring prices down.”

He noted that last year, even in the midst of a recovery, the amount of apparel sold on sale or at discount stood at 56 percent, up from 54 percent.

“In apparel, everyone is deathly afraid of weaning consumers off of discounts.”