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Currency Affairs

The high value of the euro versus the dollar puts a strain on otherwise rising sales.

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The high value of the euro versus the dollar puts a strain on otherwise rising sales.

This story first appeared in the February 12, 2008 issue of WWD.  Subscribe Today.

Vendors in the outerwear category are confident of one thing: Even though the euro is high against the dollar, oil prices are through the roof and shoppers in general are keeping an eye on their expenses, people will always need a good coat.

“You don’t hear a lot of good news about retail generally these days, but last year we had our best year ever,” said Donna Salyers, president of Donna Salyers’ Fabulous-Furs in Covington, Ky.

As a result, Salyers is confident about response in 2008 to her line of fake fur coats, which wholesale for under $100 and are largely available through mail order and catalogues.

“People want what they want and they’re happy to pay for it,” she said, adding that sales last year were up 20 percent over the preceding year. She’s expecting at least the same for the end of 2008.

“We held inventory because we’d rather run out than have too much. In talking to people, it seems that, typically, mail-order companies were selling out and didn’t have enough of what people wanted. That’s very healthy in this kind of economy.”

That optimism was echoed across many outerwear categories. George Musi, vice president of Musi Furs in Quebec, also said that 2007 was “an excellent year” one in which sales were up by about 18 percent.

“We don’t deal with furriers, we sell fashion, and the response has been phenomenal,” he said of his line of luxury furs that wholesale at $1,500 and up. He said that while “the dollar killed us,” sales have been buoyant enough to offset the higher cost of materials. The company is also selling more in Japan, which has added to its bottom line.

Other vendors are focusing on their green initiatives to bring added interest to their offerings.

“The buzz word for 2008 is green, so we talk about conserving water or recycling more,” said Linda Richards, founder of the eponymous New York-based line, which makes outwear and related accessories. Her coats start at $335 wholesale. Like other vendors, she said her business had been “phenomenal,” with a ruffled fur scarf selling 5,000 pieces right off the bat.

“We also did big business in capes and shawls, which are an extension of our outerwear business and opened up a lot of doors for us. If it wasn’t that cold, capes and shawls substituted coats for us, and we are fortunate that we had that kind of variety to offer.”

Still, any enthusiasm for 2008 and beyond is slightly dampened by the strength of the euro — especially given that Richards does much of her sourcing out of Europe.

“The prices are out of control, and the prices people will see in stores for European goods will be skyrocketing,” she said.

As a consequence, she’s moving some of her production to Poland and is sourcing raw materials from South America.

“They have some gorgeous baby llama and alpaca fabrics there, which we can use instead of cashmere, and which are much more reasonably priced than the European fabrics,” she said. She is also bringing in some furs from China, which she says is now offering a much higher quality than before.

“The wonderful thing is that we are diversified, offering fur accessories, cashmere accessories, silk-lined fur and angora wool, so depending on where a store is or what they’re selling, we have something for them,” she said.

Climate changes are another factor. Allen Zuckerman, vice president of Chosen Furs in Thousand Oaks, Calif., said that unseasonably warm winters, where the cold weather started later, affected his sales. His fur coats run at wholesale from $350 to $5,000.

“December has traditionally been a huge coat month,” he said. “But over the past couple of years, it doesn’t get cold until January. And we were also working with the fact that people who receive gift cards in December wait until January or February to spend them. All these things work against each other.”

He says he is going into 2008 somewhat positive in view of a troubled domestic economy.

“Business started to wane last August when we started seeing all those problems with the subprime and people who had been using their homes as a bank account. So August was off, September was off and the warmer weather in October made things really tough. Everything started to cycle back again from November.”

He said he is hoping for “moderate growth” this year, although he remains concerned about the higher prices in Europe.

“I think it will affect sales tremendously,” he said. “But we have to bite the bullet. We have to stay competitive by watching our overheads and our staff and eliminating unneeded road trips — 2008 is certainly going to be about keeping your belt tight.”

Ultimately, say vendors, it’s all about keeping the integrity of the product high, and keeping costs as low as possible, even if it means sacrificing some margin. Karl Matar, vice president of sales at Toronto-based Gimpex, which manufactures under the Hide Society label, says he’s optimistic because his retailers have reported a high sell-through, which he believes is because the average retail price on one of his coats is under $2,000. He saw a 10 to 15 percent growth over the past year, and hopes for about that much this year.

“We don’t just cater to the high end,” he said. “And, beyond that, we have a competitive edge because we know how to make well-designed coats that people will come back and look for if they want a second one.”

Given how much his company buys from Europe, he says he has to be savvy about his purchases.

“We hedge the currencies in advance,” he said. “We buy forward contracts at the right times to lock in and stabilize our costs.”

And, like Zuckerman at Chosen Furs, Matar says 2008 is all about running a tight ship.

“We don’t do anything exorbitant. It’s easy to fly first class to the shows, but that’s not the way to run things today because it will always come out of the cost of the garment. You’ll price yourself out of the market and you won’t be going anywhere. “

Ultimately, he says, no matter what the price point, it should be about giving the customer value.

“We try to create a product that looks more expensive than it actually is,” he says. “It’s nice for them to pick up a coat, look at the price tag, and say, ‘I thought it would be more than that.'”

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