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NEW YORK — The denim industry continues to grow at a substantial rate across all price points, but the vigor with which it has flexed its muscles in recent years is starting to slacken.

“Right now, the denim business’ greatest asset is that women are still out there in pursuit of the perfect pair, and that’s not going to go away anytime soon,” said Marshall Cohen, chief industry analyst at market research firm NPD Group. “The challenge is that it’s just so readily available. Everybody and their Aunt Tilly make denim today.”

NPD statistics indicate that, while the fervor surrounding the industry may be moderating, there’s still ample opportunity for growth. For the 12 months through March, women’s jeans sales reached $7.8 billion, a 10.8 percent increase over the $7.04 billion reported during the same period a year ago, but a slight decline from the 13.7 percent growth rate recorded between 2005 and 2004.

Much of the attention over the last several years, though, has been devoted to the industry’s smallest segment: premium denim, which has seen explosive growth that has ignited sales up and down the price scale.

It’s in the $60-and-above price range, where the real loss of momentum begins to show. According to NPD, sales of women’s jeans priced between $80 and $99.99 grew 20.3 percent for the 12 months through March to $149.6 million, a precipitous decline from the 408.5 percent growth rate reported in the same period a year ago. NPD’s figures for brands priced more than $100 shows growth rates this year have slowed to a still-respectable 34.7 percent.

“We had incredible growth in 2004 to 2005. Now we’re in a period of moderate growth, but it’s still very strong,” said Eric Beder, retail analyst with Brean Murray, Carret & Co. “Premium still has a lot of growth to it.”

The flood of premium brands, however, has made it more difficult for new players to make an impact, and a fashion shift is allowing the established players to take more market share.

“There’s still been a lot of new brands introducing themselves to the marketplace, but it’s becoming less accommodating to new brands than it had been,” said Michael Silver, president and founder of Silver Jeans, who participates in the premium segment with his 1921 label. “There will be less people trying because it’s not so easy.”

This story first appeared in the May 25, 2006 issue of WWD. Subscribe Today.

Silver also believes that, after five or six years of the premium frenzy, retailers and consumers are less likely to take the risk on yet another unknown brand.

“This is a time in the market when some of us joke, ‘I love it when it gets tougher.’ Less people are kicking tires and making a new start,” he said.

Beder pointed out that fashion has shifted to cleaner washes, dark fabrics and less embellishment, which were the very elements that helped premium brands distinguish themselves from one another. The fact that premium jeans have continued to sell after this change in fashion is evidence to Beder that the premium segment is more than a fad.

“With a fashion shift, you can argue that it’s not a fad because it’s gone through a shift in style,” he said. “If they continue to spend $200 even without the bells and whistles, that’s something more.”

NPD’s Cohen believes denim has become a “signature item” for consumers, but that they now have more items in their wardrobes than they can fit.

“There’s going to be more brands and more retail outlets than the consumer needs,” said Cohen. “At some point in the next 24 months, we’re going to see some brands get out of this business, because it’s just not going to work for them.”

Despite this, NPD’s figures don’t reveal the bursting of a denim bubble at any price level, a topic that has gotten increasing attention over the last year. According to NPD, the largest segment of the business over the past three years has remained at the $20 to $39.99 price range. For the year through March, women’s jeans sales in this range grew 5.2 percent to $3.48 billion. The next-largest price segment is jeans priced under $20, which swung to a 9.8 percent growth rate this year after posting a 2.4 percent decline last year.

Dick Gilbert, founder of Mudd Jeans, has seen fads come and go since he started in the business in 1974, and he expects another hot trend to appear within the next two years.

“I think the volume is going up slowly, but that thing you can hook your star to — a prewash or a bell-bottom or the acid wash that will generate huge sales for four or five years — that isn’t here right now,” Gilbert said.

One of the biggest impacts Gilbert believes the premium segment has had is in educating the consumer.

“They’re much smarter,” said Gilbert. “Inferior product or just OK product, regardless of price, doesn’t work anymore. You’ve really got to be on your game.”

Waning sales momentum does not indicate dwindling desire for denim among consumers, especially for women. According to Cotton Inc.’s Lifestyle Monitor, a poll of 1,000 people that showed women owned an average of 9.1 pairs of jeans in the first quarter of this year, up from a 7.9 average in the same period last year.

Angelo LaGrega, president of VF Corp.’s jeanswear coalition for the Americas, which includes the Lee and Wrangler brands, said he expects the overall denim market to grow between 4 and 5 percent in the coming years.

“We’re finding there’s a trickle-down of wear occasions,” said LaGrega. “It’s become more acceptable for females to wear denim as a dress-up outfit, and that has trickled down to the masses.”

LaGrega also has witnessed a demographic shift in those who are buying denim.

“In the next 12 to 18 months, the base of the business will be the traditional customer,” said LaGrega. “We’re expecting a surge from the 30-year-old to 50-year-old jeans market.”

NPD’s statistics show a further shift in the demographic of who is buying more denim. The 13- to 17-year-old age group represented the largest segment of the market for this year, at $1.88 billion. However, it was the 55-and-older age group that posted the highest growth rate. Women between the ages of 55 and 64 spent $519.7 million on jeans for the 12 months through March, a 27.7 increase over last year. Among women older than 65, the growth rate spiked to 41.7 percent this year from just 1 percent last year.

Heading into the back-to-school season, Beder believes the frenzy surrounding the market will be less pronounced than last year.

“In mass and specialty channels, they have become a little more cautious,” he said.

Overall, Beder believes most retailers will make slight increases to their denim inventories, but few will pull back.

“The Abercrombies of the world, they’re still going to be heavily weighted towards denim, but not as aggressive as last year,” he added.

The Top 5 Women’s Jean Brands By Sales: 2006
1. Levi’s
2. Old Navy
3. Gloria Vanderbilt
4. Lee
5. Gap
Source: NPD Group

U.S. Women’s Market
 
2006*
2005
% Change
Women’s Sportswear Dollar Volume
$81.07 billion
$77.26 billion
4.9
Women’s Jeans Dollar Volume
$7.79 billion
$7.04 billion
10.8
Women’s Sportswear Unit Volume
4.56 billion
4.36 billion
4.7
Women’s Jeans Unit Volume
336.1 million
306.3 million
9.7
*NOTE: Data is for the 12 months through March 2006.
SOURCE: NPD Group

Channel Surfing
U.S. Women’s Jean Sales by Dollar Volume*
 
2006 Sales*
% Change over 2005
Specialty Stores
$2.72 billion
13.8
Department Stores
$1.35 billion
7.6
National Chains
$1.25 billion
9.2
Mass Merchants
$1.39 billion
10.4
Off-price Retailers
$523.9 million
24.8
Outlets
$61.9 million
-13
Mail/Internet
$246.9 million
-13.2
Other
$254.8 million
18.3
*NOTE: Data is for the 12 months through March 2006.
SOURCE: NPD Group
For The Ages
U.S. Women’s Sales by Age
AGE
2006 Sales*
% Change over 2005
12 & Under
$190.6 million
27.2
13-17
$1.88 billion
11.3
18-24
$1.57 billion
2.3
25-34
$1.29 billion
15.8
35-44
$1.1 billion
7.7
45-54
$1.06 billion
6.9
55-64
$519.7 million
27.7
65 +
$182.6 million
41.7
*NOTE: Data is for the 12 months through March 2006.
SOURCE: NPD Group