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Denim is proving to be one of the few sweet spots in the sour retail scene.
Stores began winnowing their denim assortments more than a year ago in an effort to concentrate on a stable of proven performers. Recent data indicates the strategy has translated into surging denim sales at a time when overall apparel sales have generally been flat.
Making the feat even more impressive is that signs of a denim resurgence began appearing in the spring and have carried through the summer months, a stretch of the year that typically sees denim sales taper. With momentum building, retail analysts and manufacturers are expecting the trend to continue and are looking to finish the year on a high.
“It’s become very evident that denim is clearly recession-proof,” said Marshal Cohen, chief industry analyst at Port Washington, N.Y.-based The NPD Group. “The reason for that is that denim has been perceived as the one key category that they can’t live without. That quest for the perfect pair continues to thrive.”
Kimberly Greenberger, retail analyst at Citigroup, noted in a report that denim sales increased 8.4 percent during the second quarter of 2008, compared with a sales gain of only 0.8 percent for the overall apparel market. The increase was a marked reversal from the first three months of the year, when denim sales declined by 5.3 percent. Sales were strongest during the second quarter at specialty stores, department stores, off-price retailers and factory outlets.
According to NPD, women didn’t let the heat of the summer months stunt their appetites for denim. Women’s jeans sales climbed 15.4 percent to $1.57 billion from May through July and the average price increased 7.8 percent to $24.34. During the same three-month period in 2007, women’s jeans sales increased 3.8 percent.
Selling denim during the hottest months of the year reflects the technical advancement of the denim industry, said Helen Kim, director of operations at retailer National Jean Co. Gone are the days of jeans being only heavy, rigid and boot-cut. New weights, colors and fabrics have helped make denim more of an all-seasons category.
“It’s the evolution of denim,” said Kim. “People are playing with lighter-weight fabrics and being more successful with it than in the past.”
Consumers also appear to be buying steadily at all levels of the denim spectrum. L.E.I. has found success in its first season as an exclusive brand at Wal-Mart after having spent years as a leader in department stores in the juniors segment. Michael Silver gets two reads on the market with his moderate Silver Jeans label and premium 1921 brand. His Silver Jeans brand, which retails for $75 to $95, has been having one of its best years.
“I’ve been waiting for push back and it hasn’t happened,” said Silver. “We were shipping strong through June, July and August, and I was very much waiting for the other shoe to fall sometime in August, and so far it hasn’t.”
Silver believes the wider denim market has benefited from consumers viewing denim — even those brands priced north of $100 — as a core product that delivers value.
“Somehow denim is perceived as something that has more longevity and will last,” said Silver. “Therefore, it’s seen as a safer purchase.”
Cohen believes consumers have been conditioned to premium denim jeans with price tags upward of $150. But shoppers have also realized that many other brands at lower price points have elevated their styles and can meet their needs just as well.
“Consumers recognize that whatever the purpose of them buying the jean…whatever the statement is they’re looking to make, we’ve entered into a time where an $80 jean can make that same statement much like the $150,” he said.
Cohen also sees more consumers buying one or two premium brands and rounding out the denim collections with several more moderately priced lines.
Eric Beder, retail analyst at Brean Murray, Carret & Co., believes leading premium brands such as True Religion and Seven For All Mankind have reached a critical stage in their development. Those brands that survived the shakeout have solidified their position with consumers by delivering product with consistent styling and, above all, fit.
“We’ve seen the shakeout at department stores with denim and we’re not seeing new brands enter the premium denim space,” said Beder. “I think that’s partly because premium is buying for fit.”
Women have become more loyal to the consistent fits they’re finding in premium brands. Those brands also aren’t facing serious competition from other categories.
“We’ve seen no other bottoms work beyond denim,” said Beder, who believes denim will continue to be the key bottom for the remainder of the year.
When Guess last week reported booming revenue and earnings gains for the second quarter, denim was singled out as a key driver, so much so that Guess is moving quickly to offer a cohesive global denim assortment.
“This year, we are making denim our number-one focus not only in the U.S., but worldwide,” said Paul Marciano, chief executive officer, during a conference call with analysts.
Denim represented 30 percent of sales for Guess in the second quarter, up from 26 percent a year ago.
“We believe Guess is positioned, with more premium denim (at $158) than ever before, to be a major beneficiary of this trend,” said Beder in a research report on Guess. “In the current environment, we believe the consumer wants items that are comfortable, add value and provide a sense of fun. Premium denim is a winner on all counts, in our view.”
Beder believes True Religion is poised for similar success for the same reasons.
Younger brands are even beginning to find more of a foothold in the market, as retailers become more willing to test something new. Jason Trotzuk, president and designer of premium brand Fidelity Denim, has seen his business in the U.S. double. The U.S. now represents more than 50 percent of the firm’s sales, compared with 15 to 17 percent a year ago.
“We’ve had a huge spike in our business and most of it seems to be coming from people who are not replacing other brands, but those interested in new product in the market,” he said.
Trotzuk sees further opportunity for designers as trends return to more washed-out looks and detailing. Ultimately, he agrees that denim’s success in trying times has shown consumers have a different view of denim compared with other apparel categories.
“People don’t consider denim as fashion, they consider it as basics,” he said.