Fashion jeans marketers are still waiting for the next big thing — and preferably, the next big things.
At various price points and channels of distribution, the jeans market received an enormous lift from the popularity of colored denim in 2011 and into 2012. With that trend subsiding since the spring, a variety of new options — waxed and coated denim and new interpretations of indigo — have yet to fill the sizable void.
“We’ve gone from one big thing to a lot of smaller trends,” said Marc Crossman, Joe’s Jeans Inc.’s president and chief executive officer, this month as the company reported a small third-quarter loss created in good part by weak traffic trends and a drop in sales of its secondary brand, Else.
Overall jeans consumption has not been the problem. In the 12 months ended Aug. 31, dollar volume in the women’s jeans market registered a healthy 8.4 percent increase to land at $8.91 billion versus $8.22 billion in the prior-year period, according to research from The NPD Group of Port Washington, N.Y.
Unit sales were up even more — 11.6 percent to 348.8 million — during the 12-month period, and therein lies some of the problem with the jeans scene of late 2013: Women are still buying and wearing jeans, but they’re not stretching their budgets as they once had to do. The average price of a pair of women’s jeans dropped 2.9 percent to $25.55 from $26.31, and an analysis of sales by price point underlines not only the weakness of the higher-end premium jeans that virtually reinvented the denim category over the last decade, but the increasingly promotional nature of sportswear retailing today.
The denim price category generating the highest level of growth during the 12 months covered by NPD was the under-$25 stratum, in which sales grew a powerful 16.1 percent to $3.36 billion. The strongest dollar concentration was in the category of jeans priced $25 to $49.99, which grew 9.6 percent to $3.54 billion. Jeans in the $50 to $74.99 category also increased 9.6 percent to $1.19 billion.
But high-priced jeans — those at $75 and above — suffered a double-digit decline, with sales falling 19 percent to $818,000 from $1.01 billion in the year-ago period. The percentage decline is identical to the one weathered by men’s jeans during the same period, when sales of the highest-priced category dropped to $381.9 million.
To Marshal Cohen, chief industry analyst at NPD, the numbers tell a tale of a market that’s battling saturation at the high end and heavy promotions on the other.
“We just came through a back-to-school season when parents were saying, ‘We’re not going to spend big bucks,’” he said. “Demand is starting to slow down and ultimately inventories are building up, so it’s clear that prices are going to drop. No retailer wants to be overinventoried in denim and, when they see a build-up, they stick a 40-percent-off sign in the window and send out an ‘on-sale’ e-mail.”
Cohen views denim — worn by just about everybody on the weekends and increasingly during the week, as well — as a strong indicator of where the apparel business is headed.
“Women are no longer looking at their wardrobes and thinking about the new things they want,” he said. “They’re looking to complement their existing wardrobes and fill in the holes.”
After “years of sustained growth,” those holes aren’t in denim. The thinner air at the high end of the market will “lead the premium guys to try to fill gaps in the midtier price range,” Cohen said. “For a long time there was an almost obscene amount of markup in premium denim, and for the last few years color kept the premium people going a little bit longer. Now they’ll have to compete in a smaller-margin world, in a saturated market with less demand.” Yoga pants have been part of a general trend toward activewear that has pulled the fashion spotlight away from jeans, he noted.
The data also show a continued concentration of jeans dollars at the specialty store level, with the segment extending its dominant market share to 42.3 percent of women’s jeans dollars from 42.1 percent in the year ended August 2012. Department stores picked up a bit more, growing to 15.8 percent from 15.5 percent, while national chains, including J.C. Penney Co. Inc., fell to 12.1 percent of dollars from 12.5 percent. Reflecting the strength of lower price points, off-price retailers grew to 10.2 percent from 9.6 percent and mass merchants grew to 9.8 percent of jeans dollars from 9.5 percent.
Manufacturer-owned stores — an expanding business for many upscale denim brands and upscale labels carrying denim — fell to 3.7 percent from 4.1 percent.
Even though the dollars aren’t coming into denim at the peak of the price pyramid as they once did, they are continuing to come in faster than those for apparel overall. Denim’s 8.4 percent dollar growth is nearly five times greater than the 1.7 percent growth in women’s apparel overall, to $111.94 billion, for the same period. Denim’s share of the women’s apparel market grew to 8 percent from 7.5 percent in the year ended August 2012.
Rebecca Duval, vice president of retail and apparel and an analyst at BlueFin Research Partners in Boston, doesn’t believe the market is lacking in fashion newness. She cited wax- and resin-coated denim, darker indigo looks, motocross and a return of the boyfriend silhouette as trends that have performed fairly well.
However, she’s noted a proliferation of denim at all price points and at more stores as making it harder for brands to stand out.
“There were a lot of players in premium and now it’s started to scale back,” she said. “The Seven For All Mankinds and the Citizens of Humanitys and the J Brands have real estate in the department stores, but it’s going to be tough for others to break in. Everyone is putting denim in their lines and market share is being spread out.”
Among those incorporating denim into their assortments are specialty stores that are increasingly on-trend and, at the same time, increasingly promotional.
“I’ve never seen anything like it, and that’s putting it mildly,” she said of the promotional tenure of the current season as weak traffic prompted stores to cut prices early, often and deeply. “Nothing buys you a lot these days.”
The current splits in the market can be seen in the financial results of a number of companies with large denim businesses. Chip Bergh, president and ceo of Levi Strauss & Co., pointed to a strong performance by the company’s iconic 501 jeans, as well as updated and chino interpretations of it, as the company reported that its third-quarter profits doubled on a 3.7 percent revenue increase.
At VF Corp., jeanswear revenues, including those for the mainstream Wrangler and Lee brands, enjoyed a strong third quarter, growing 4 percent as operating income grew 20.5 percent. The contemporary unit, which houses Seven For All Mankind, had a tougher quarter, with sales up 0.8 percent but operating income of 29.6 percent. VF ceo Eric Wiseman noted that “the whole premium-luxury segment has been a little soft, although it’s been better in Europe, where in jeans, premium is more the norm.”
The company doesn’t break down quarterly sales by brand, but the ceo noted that the Seven For All Mankind business was up 10 percent in Europe during the quarter, adding, “They were up against a big year, too.”
Susan Kellogg, president of VF’s contemporary coalition, acknowledged “continued challenges in the U.S. premium denim market,” while noting that “it’s primarily an issue for our important wholesale customers. Our own…stores have been up at a low-single-digit rate year-to-date, so there’s ‘relative’ strength there, but clearly not enough to offset the total coalition performance.
“Our team continues to work hard to outperform in this market, and those efforts are paying off with brand strength even in a soft market,” she added.