From designer to moderate, companies are being forced to scrutinize their budgets in a punishing retail climate that has claimed more than a few manufacturers in recent months. Executives said cost-cutting strategies need to take into account every aspect of an operation, even if a turnaround lies ahead.
“There are a lot of people out there who are feeling more optimistic about future business, but that is not an excuse to ease up on reducing or controlling overhead,” said Allan Ellinger, senior managing director at Marketing Management Group. “This is the worst I’ve seen it because a lot of things have happened simultaneously — the conduct of department stores, the change of consumer preferences, the strength of Wal-Mart and Kohl’s. These things are impacting our industry.”
For vendors, cost-cutting tactics include cross-training employees to do a multitude of tasks, reducing the number of styles in a collection and focusing only on highly salable designs. These measures also include shifting production to the most versatile and efficient factories and deploying more traveling road representatives to visit stores who cannot attend market.
This less-is-more philosophy is also extending to vendors’ merchandising and advertising agendas, as costly in-store displays are being replaced by trendy fashion signage to denote in-store real estate. Ad campaigns have often gone grass roots, with direct-mailing targeting the store’s best customers.
However, even with all this strategic maneuvering, it is more a matter of survival than profiteering. Vendors are still planning for single-digit sales gains this year, at best, as margin squeezing and lackluster consumer spending minimize their prospects.
Examining every entry on the profit and loss statement, from top to bottom line, is yielding creative ways of saving money, said Bob Salem, a consultant and former vice president for marketing and licensing at The Leslie Fay Co.
“The technique that we’re using to increase the top line and examine our sales growth is to go over with a fine-tooth comb every single account that we do business with on a door-by-door basis,” Salem said. “We look at every individual store to see if there’s a missed opportunity.”
To heighten competitiveness, Leslie Fay has lowered its initial markup on garments and reduced the number of styles within fashion groups from 25 to 15 looks, Salem said.
“We’re going much narrower and making better bets on fewer styles and then going deeper with those looks,” Salem said. “We have to reduce markdowns and the way we’re doing it is to narrow down our offerings.”
Leslie Fay’s new economics have extended to its in-store collateral. Instead of spending $400 on fancy store fixtures, the company is honing its retail presence with 2-by-3-foot fashion posters that cost $8 apiece.
On the other end of the spectrum, luxury giant LVMH Moet Hennessy Louis Vuitton said it expects operating income to “rebound materially” this year, thanks to a broad cost-cutting program and the prospect of growth from its Fendi and Donna Karan labels.
This decision was made after the company issued its fourth profit warning for 2001 and reported that sales for the year grew 5 percent, to $10.9 billion. Its fourth-quarter sales dropped 4 percent, to $3.12 billion.
Amidst Kasper ASL’s filing of Chapter 11 last week, chairman and chief executive officer John D. Idol has made a number of other moves aimed at improving its operations. This includes putting its contractors in charge of unit purchasing and an overall workforce reduction of about 300 employees over the past six months, giving the firm, being renamed the Anne Klein Group, an immediate savings of about $15 million. The company’s two main businesses remain the Anne Klein bridge sportswear line and the Kasper better-price suit brand.
“We will have better control over our inventory and manufacturing, we will have a reduced cost structure and reduced debt and interest payments,” Idol said at the time. “That will help us grow in the future.”
Still, at the root of retail’s performance is the consumer, and they are much more conscious about the price-quality-value ratio, said Jason Tynan, chief executive officer at the better sportswear firm Finity Apparel Group based here.
“The most important thing we’ve done is put much more pressure on design teams to come up with the right product,” Tynan said. “And much more pressure on factories and suppliers to insure quality of fit and construction. We’re also working with suppliers and partners to insure the lines are priced competitively. We’ve kept the prices consistent and on some key areas, lowered prices.”
At the moderate sportswear firm Requirements, based here, quicker lead and turn times are the result of revamped design and sourcing departments. Sales are planned ahead by single digits this year.
“We’re allocating our personnel structure to focus on areas that drive the bottom line,” said Marc Abramson, vice president. “We’re moving more employees into sourcing, design and merchandising departments, while scaling back in other areas. And we’re continually fine-tuning our advertising to be more focused on key fashion items.”
The firm also has shifted its production to accommodate stores buying closer to need, Abramson said, “because we’ve beefed up sourcing, our lead time has been reduced.”
To improve sales and help stores, Berek Knits is implementing cost-control methods. The firm is sending targeted stores look-books of its seasonal novelty sweater collections to entice retailers who were not able to see the line during market.
“Stores can shop directly from our mailouts, which we call picture packages,” said Jean Mercier, account executive. “We send the whole line, and the buyer doesn’t necessarily have to come to market. Many stores are reluctant to leave their stores for long at a time.”
In a bid to keep wholesale prices stable, Mercier said the company is working extremely close with its Chinese factories to contain production costs. The firm is planning sales up by single digits this year.
Jerell Inc., a sportswear and dress house that’s a division of Dallas-based Haggar Corp., is increasing its oversees production and allotting more work to fewer factories to strike better deals.
“We’re analyzing every aspect of our business to run a leaner, more cost-efficient company,” said Jim Vierling, vice president of road sales. “Our strategies are paying off with great results. Our collections are tighter and more focused. And we train our road teams in sales, marketing and merchandising techniques to better service stores.”
The bottom line is that no one can ignore the tightening constraints of the economy, August Silk president Lou Breuning said.
“We are in a price-sensitive mode,” he said. “We’ve got to be able to maintain the integrity of our product and perhaps find a way to have the exact same product and get things made at better prices — to have more margin.”