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The industry is betting big on denim for back-to-school.

This story first appeared in the July 16, 2009 issue of WWD.  Subscribe Today.

In a landscape pockmarked with liquidations, reduced inventories and discounting, retailers and brands are targeting denim as the vehicle to drive sales in the year’s second most important selling season.

Gap Inc. and Guess Inc. are going back to their heritage for fall and stressing denim in their merchandise plans, and Levi Strauss & Co. thinks an uptick in denim interest will help turn around lagging volume. A shift toward more affordable prices in many lines should also prove attractive to shoppers who have pulled back on spending because of the recession.

Early forecasts on the season aren’t upbeat, but denim has shown resilience during the downturn.

The National Retail Federation’s b-t-s survey found the average family with children in kindergarten through high school will spend $548.72, a drop of 7.7 percent from $594.24 last year. Although this figure includes anticipated spending on everything from pencils and Trapper Keepers to computers, it’s certain that consumers will be hunting down sales in almost every spending category.

No less an authority than J. Crew Group Inc. chairman and chief executive officer Millard “Mickey” Drexler has said the jeans market is saturated at cheaper price points and at $125 and above. However, Drexler, who this week launched the Madewell ’37s jeans collection, also thinks there’s an opening in the middle for “cool, well-made, well-designed jeans at $59.50 and up to $100.”

The recession “has clearly changed the spending habits of American families, which will likely create a difficult back-to-school season for retailers,” said Tracy Mullin, president and chief executive officer of the NRF. “As people focus primarily on price, strong promotions and deep discounts will ultimately win over back-to-school shoppers this year.”

College freshmen may present the best opportunity. The NRF survey found freshmen will spend $820.77 on average getting ready for school. Almost $180 of that will be spent on apparel and shoes.

While the overall outlook may be weak, the denim category has proven itself a performer, and brands and retailers are counting on that momentum to carry through the fall.

The women’s denim market managed to grow for the 12 months through March, according to The NPD Group, a market research firm. Women’s jeans sales totaled $8.03 billion during that time, a 4.6 percent increase over the $7.68 billion reported in the same period the previous year. In comparison, overall sportswear sales fell 3.1 percent to $72.51 billion from $74.81 billion. The number of jeans sold also increased, rising 6.4 percent to 342.6 million from 322.1 million.

For fall, brands and retailers are looking to capitalize on a style shift towards vintage and distressed looks to build buzz in the category. Several major retailers are also looking at fall denim collections as a way to reassert themselves as go-to denim authorities.

Gap Inc. will introduce an overhaul of its denim offerings next month as part of the company’s makeover effort. The new 1969 Premium Jeans collection was unveiled in April, and is designed to reflect current trends.

“We’ve been going through every category and asking ourselves, ‘Is it right for today?’” Patrick Robinson, Gap’s executive vice president of design, told WWD in April, noting that revamping denim has been his priority. “Gap is the iconic American brand, so you start with jeans and T-shirts.”

Robinson enlisted a team of premium denim experts from lines in the $150 to $500 range and challenged them to apply their skills within Gap’s price parameters: under $60. The results include a range of styles, including the hallmark women’s always skinny jeans and the now ubiquitous boyfriend jeans, and men’s skinny and straight cuts, as well as some extras, such as denim shoes by Pierre Hardy, hats by Albertus Swanepoel and tops. The major message is bottoms with a focus on fit.

“Across the board, we want it to feel sexy and authentic,” Robinson said.

Glenn Murphy, Gap’s chairman and ceo, made it clear in a conference call with analysts in May that he was counting on a strong denim showing.

“Our heritage category is denim,” he said. “It’s nice to come back every now and then and reclaim your rightful position and make some noise and let people know that not only do you have the fit and the washes and the selection people are looking for, which is obviously critical in this business, but I think there’s also a good value message when it comes to Gap.”

Guess is employing a similar strategy. This spring, the company said it would look to turn consumers’ attention back to Guess’ denim heritage. As part of that effort, management hopes to take advantage of shifting consumer spending habits by tailoring its denim assortment to those shoppers looking for greater value from premium denim.

Guess will increase the percentage of denim in company stores to 40 percent from 30 percent, space that will be freed as Guess replaces tailored jackets, pants and skirts, as well as fancy shirts and dresses. However, dresses will still appear in holiday collections.

The company’s focus is now on a midtier price zone between $108 and $148, which co-founder Paul Marciano believes will enable Guess to grab market share from other labels. The company reopened its SoHo flagship in Manhattan over the July 4 weekend, redesigning the space to help push denim.

“We feel denim is in the roots of our brand and our company, so it is very well represented,” said Carlos Alberini, president and chief operating officer of Guess Inc.

There’s also been a strong move toward washed out and distressed looks. Brean Murray, Carret & Co. retail analyst Eric Beder said the shift is already evident in stores.

“Although overall newness remains limited throughout the premium denim segment, we are seeing increasing evidence that there has been a shift back to destroyed denim, with rips and tears becoming more of the mix at key players,” Beder said in a June 29 mall report.

Beder believes this will benefit one premium player in particular. “Given True Religion’s initial success as a destroyed denim pioneer, we believe this bodes well for the company,” he said.

Beder has also found consumers reacting strongly to distressed denim at teen retailers like Abercrombie & Fitch and American Eagle. Getting consumers to pay full price for it is proving difficult in the summer, which could be a bad sign for fall.

The distressed trend has already worked its way through the denim pricing spectrum. While discussing second-quarter earnings results on Tuesday, Levi Strauss & Co. president and ceo John Anderson said the company was seeing consumers gravitate towards two distinct styles.

“The consumer, depending on the wearing occasion, is either wearing a clean, more polished finish or going to the opposite extreme,” Anderson said.

He added that straight and skinny styles continued to be the dominant trend. Anderson also believes Levi’s stands to benefit in the current environment.

“I think consumers are going back to brands they trust, brands they know, brands they can rely on,” he said. “We clearly align with those consumer expectations.”

However, Robert Hanson, president of Levi Strauss Americas, remained cautious about his outlook for the b-t-s season. While not providing specific guidance, Hanson said retailers were adamant about keeping inventories low, as they have been for some time.

Levi’s is responding by working with its wholesale customers and positioning itself to respond quickly if sales should be stronger than expected.


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