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Silver Linings

A spike in the birthrate has vendors feeling hopeful.

Appeared In
Special Issue
WWD MAGIC issue 02/17/2009

While the outlook for children’s apparel sales in the U.S. is rocky like the rest of the fashion industry, the kids’ business stands out with a few bright spots, including a U.S. baby “boomlet” that could help shore up sales, according to industry analysts.

Except for a 2.5 percent gain in 2000, the U.S. birthrate this decade has been either flat, or in the case of 2001 and 2002, fallen by less than 1 percent. The latest birthrate bubble began in 2006 with a 3 percent gain in newborns, followed by a 1 percent increase in 2007 to 4,315,000 infants. (The 2008 birthrate is still being tallied by the National Center for Health Statistics.)

In a robust business climate, this two-year gain of 181,687 newborns would be less of a big deal, said Kelly Tackett, senior consultant with Retail Forward. However, the increase during a recession is significant because “the market is growing,” Tackett said.

In other good news, the percentage of shoppers looking for infants, toddlers and children’s clothing remained constant in 2008, according to Retail Forward data. Last year, 30 percent of shoppers on a monthly basis were in the market for kids’ apparel, the same as 2007. In 2006 and 2005 that amount was 31 percent.

Like elsewhere in retail, shoppers are also finding more children’s apparel bargains, according to the U.S. Bureau of Labor Statistics’ Consumer Price Index. In December, girls’ apparel prices were down 4.4 percent compared with a year earlier, while boys’ apparel prices were largely unchanged and infants’ and toddlers’ declined 1.1 percent. In contrast, women’s apparel prices in December declined 3.5 percent from a year earlier, while men’s clothing prices dimmed 1.5 percent.

Lower prices, coupled with cash-strapped consumers, also have dampened children’s apparel revenues. According to retail consultancy The NPD Group, both girls’ and boys’ apparel had a year-over-year loss of 2.3 percent for the period ending Nov. 30, the latest available data. By comparison, women’s apparel prices for the period were down 3.3 percent and men’s clothing sales fell 4.3 percent.

Among children’s apparel categories tracked, tailored clothing posted the largest annual sales decline of 11.6 percent, followed by drops of 9.7 percent for children’s and infants’ sets, 4.6 percent for bottoms, 3 percent for hosiery and 1.1 percent for tops, according to The NPD Group.

The only two children’s apparel categories posting sales gains were swimwear, up 11.8 percent, and fleecewear, with a 6.1 percent gain, according to NPD.

Like elsewhere in the apparel industry, the children’s business has seen its share of belt tightening, such as the December decision by Gymboree Corp. management to reduce salaries by up to 10 percent for senior management and corporate staff, as part of a larger strategy to cut costs. Chief executive officer Matthew McCauley, while noting the company has a strong balance sheet with $100 million in cash and no debt, is preparing for rough times ahead.

“There is clearly weakness in the consumer sector and we expect further deterioration in the consumer markets,” McCauley said. With 844 stores, Gymboree’s comparable-store sales for the fourth-quarter 2008 ended Feb. 1 dipped 2 percent, which stands in contrast to many of the double-digit declines facing retailers in general.

Betty Chen, a retail analyst with Wedbush Morgan Securities, said specialty retailers like Gymboree are being strategic with the length and extent of their sales to avoid wholesale discounting that might conflict with their quality-merchandise image and niche. “So when consumers see something on sale, they feel like they’re getting a bargain,” Chen said.

Hewing to your apparel niche in tough times also holds true for small players in the children’s business, like Los Angeles-based Precious Few on Earth, which caters to infants through six-year-olds. The company only sells colorful T-shirts with raised animal appliqués, like an elephant with flappy ears. The shirts, which retail for $25 to $35, are mostly produced in Los Angeles, sold in local boutiques and farmers markets and have gotten a small celebrity following, with actresses Courtney Thorne-Smith and Courtney Cox as customers.

“It’s hard for everyone now in this economy, but I feel like I have a little bit of an advantage because I have one line with room to grow,” said Precious Few designer and owner Saundra Brungard. “I am very hopeful the economy will pick up at the end of the year. We just have to be conscious of every expense and what we produce.”