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Specialty Stores Lead Women’s Denim Gains

Despite a variety of challenges in the U.S. denim market, women’s jeans have performed solidly, with sales up 3.2 percent in the 12 months ended Sept. 30.

It’s hard to keep a good fabric — never mind a classic American fashion item — down.

This story first appeared in the November 9, 2011 issue of WWD.  Subscribe Today.

Perhaps that helps explain the solid performance of women’s jeans despite a variety of challenges in the U.S. denim market, from higher prices to shifting fashion assortments, and the overall macroeconomic climate, which continues to be buffeted by high unemployment and low consumer confidence.

But perform jeans have, and in a manner superior to the rest of the women’s sportswear business.

In the 12 months ended Sept. 30, sales of women’s jeans were up 3.2 percent, to $8.65 billion from $8.38 billion in the prior-year period, according to the most recent data from The NPD Group, the Port Washington, N.Y.-based research firm. Units dipped 2.7 percent, to 360.1 million from 370.1 million, but that decline was more than offset by a 3.5 percent increase in the average price of a pair of jeans at retail, which rose 3.5 percent to $23.38 from $22.58 in the year ended in September 2010.

The upward shift in pricing, reversing a deflationary trend stretching out over years, came from a number of sources, none more important than the dramatic rise in the cost of cotton that elevated the price of cotton-based products at all levels of distribution, from discounters to luxury retailers. Suppliers and retailers of fashion denim, however, took the inflationary pattern as a reminder that their products would be salable based not on their price tags, but by the innovation they could bring to elements ranging from jeans’ construction and design to their marketing and in-store presentation.

The denim sold to female consumers in 2011 hasn’t been immune from the promotional pressures faced by stores throughout the retail landscape, but it’s had a story to tell to the consumer. Perhaps the most important of these has been the ever-widening palette that kept stores from falling into the “just another pair of blue jeans” trap.

Closets and drawers were well-stocked with various shades of indigo, but the presence of brights and pastels in stores resonated with women during the spring, summer and fall, not only keeping denim numbers healthy but also opening up opportunities for stores to sell new tops to go with jeans. Just as the skinny silhouette appeared to be growing tired, flared legs materialized as the next fashion silhouette. Treated fabrics, such as waxed denim, and alternative cloths such as corduroy found their way into lines. Even as producers of premium jeans like J Brand diversified to expand their franchises into wider ranges of sportswear, they worked to strengthen their denim assortments with fresh fashion, cognizant of the futility of trying to compete in the fashion arena with price as the means of differentiation.

As a result, jeans were among the stronger performers in the women’s sportswear arena and actually increased their share of the business. Overall, women’s sportswear dollars ticked up just 0.8 percent in the year ended in September, to $86.76 billion from $86.07 billion, even as units suffered a smaller decline than jeans, off 2.3 percent to 5 million. (NPD defines sportswear to include tops, bottoms, jackets and blazers, dresses, outerwear and fleecewear.) While jeans’ share of women’s sportswear units was essentially flat, at 7.2 percent, its share of sales moved up to 10 percent from 9.7 percent in the corresponding period ended in September 2010.

“Denim is a category that tends to do better than the overall market,” observed Marshal Cohen, chief industry analyst at NPD, “and you can look for denim to stay that way until something comes along to dethrone it as the ultimate purchase that consumers are willing to make. There’s always been the quest for the perfect pair. The customer is still looking for the perfect pair, but now they’re looking for not just durability and fit, but the right service, the right innovation, the right technology.”

Cohen believes those are among the reasons that specialty stores have taken such an inordinate amount of market share from other channels of distribution and don’t appear to be giving any of it back. In the most recent 12 months, specialty store sales of women’s jeans grew 11.1 percent, to $3.67 billion from $3.3 billion in the prior-year period, and lengthened their market share lead to a hefty 42.4 percent of overall sales from 39.4 percent in the prior year.

 

By contrast, department stores, national chains and mass merchants experienced declines in sales as well as share, with department store sales down 6.8 percent, to $1.16 billion, and their share down to 13.4 percent from 14.8 percent in the 2010 period. Mass merchants saw an even more rapid erosion in sales, dropping 7 percent to $1.08 billion, as market share slipped to 12.4 percent from 13.8 percent. National chains were stung slightly less: sales fell 1.3 percent to $1.09 billion from $1.11 billion, and share receded to 12.6 percent from 13.2 percent.

No other retail channel registered as much as $1 billion in women’s jeans sales in the 12-month period, although off-price retailers’ sales rose 0.2 percent to $826.6 million even as their market share dropped to 9.6 percent from 9.8 percent. Factory outlets’ sales managed to jump 12 percent, but only to $119.3 million, lifting their share to just 1.4 percent. Direct mail and e-tail pureplays saw their women’s denim sales rise 5.5 percent, to $377 million, with a share of 4.4 percent.

But women’s jeans remain a specialty store business and there’s little on the horizon to suggest a change is in the air.

“Department stores tend to jump on a trend and make everything in the store about that trend,” Cohen observed. “Specialty stores spread out the story, touch on different ideas — things that are happening now and things that are coming up — and even if it’s a matter of perception and not always reality, they have a reputation for service that’s going to provide you with something that’s unique and different, that’s more likely to have something a little bit more avant-garde as well as a broader selection of things that are likely to fit in with the quest for the perfect pair.”

In fact, the gravitation of denim business towards the specialty stores might be accelerating. True Religion Apparel Inc. has been building business in its own stores and in its wholesale specialty store accounts. But on a conference call to discuss the company’s third-quarter earnings this month, Lynne Koplin, president of the company, noted softness in women’s denim at department stores as these merchants “have shifted their merchandise assortments to nondenim bottoms and reduced their investment in denim.” She added that sales of the company’s premium women’s products to major department stores are “not expected to be positive in the next few quarters.”

Department stores, even those that have done business at upper price points, have tended to become more basic in the face of uncertain consumer demand and, at least in the past year, rising prices. “The department stores appear to be backing down — on fashion and on premium price points too — at a time when a lot of the specialty stores are finding they can utilize fashion to overcome just about any price resistance,” said one financial analyst, requesting anonymity. “This just opens the door a little wider.”

NPD figures on women’s denim sales by price showed higher-priced jeans moving more quickly than their lower-priced counterparts, although data for jeans at $100 were insufficient to provide a statistically meaningful sample. Still, sales of jeans priced under $25 fell in dollar terms, off 5.3 percent to $3.99 billion, while those in the $25-to-$49.99 bracket rose 11.1 percent, to $3.16 billion, and the $50-and-up category saw the largest spike, ahead 13.4 percent to $1.5 billion. The lower end of the market could benefit in late 2012 as companies begin working with cotton fabric that’s priced below what they were paying a year earlier.

But it will take more than lower or flat prices to sell women on denim in seasons ahead.

“The numbers and what you hear in the market indicate that denim is extremely price sensitive when it’s positioned as a commodity and not very price sensitive at all when it’s positioned as fashion,” Cohen said. “In coming seasons, people will be looking for brands that can make denim even more innovative and, even among the brands at opening price points, figure out how to take the commodity and make it look unique and different.”