Jeansmakers have some catching up to do.
This story first appeared in the April 18, 2012 issue of WWD. Subscribe Today.
Hit about as hard as any apparel category by last year’s upswing in cotton prices and further hampered as dressier classifications such as dresses and men’s tailored clothing seized the style spotlight, sales of women’s and men’s jeans declined on both a unit and dollar basis in 2011, after a unit decline and small dollar pickup in 2010. Last year, it was women’s jeans that saw the biggest drop-offs, with dollars down 3.3 percent to $7.79 billion and units down 6.7 percent to 311.7 million, according to The NPD Group’s analysis of retail figures for the year.
Men’s jeans sales declined a bit less dramatically, descending 0.5 percent to $5.71 billion, as units dropped 5 percent to 219.5 million, and leaving the market for adult jeans off 2.1 percent at $13.51 billion, with units down 6 percent to 531.2 million.
With units sliding more sharply than dollars, the one metric not falling in denim last year was price as supply-chain pressures prevailed in a year-long tug-of-war with thrifty consumers hellbent on bargains. Overall, the average price of a pair of jeans rose 4.1 percent, to $25.43, with men’s up 4.7 percent to $26.03 and women’s up 3.7 percent to $25. Those increases hardly compensated for wholesalers’ higher costs, or even many retailers’ expenses.
Performance by price point varied greatly by gender, indicative of the somewhat uneven bifurcation going on among consumers at different income levels and with different tastes. Sales of jeans priced at $75 and up grew 25.5 percent, to $803.2 million, in the women’s market but were down nearly as much — 21.5 percent — in men’s, to $345.6 million. In men’s, the only price points to enjoy dollar growth were between $50 and $74.99, up an impressive 37.3 percent to $844.1 million, while that bracket rose just 0.1 percent in women’s to $1.04 billion. Jeans at $25 to $49.99 declined for both genders, with women’s off 1.6 percent to $2.94 billion and men’s down 1.5 percent to $2.42 billion. Even with an 11.3 percent decline, jeans under $25 were still the highest-volume segment of the women’s market at $3.01 billion, while the 5.8 percent drop for that price stratum in men’s left it below the $25 and up bracket, at $2.11 billion.
“Guys aren’t buying into $300 jeans like they were,” said Marshal Cohen, NPD’s chief industry analyst. “The sweet spot for them is between $50 and $75, and for women it’s higher. We used to think of denim as being a commodity, but when it moved into fashion it lost its insulation. It was able to buck the deflationary trends in apparel for a long time but now it’s a lot more cyclical. Consumers are building their wardrobes in other areas, like dresses and footwear, before they’re going back for more jeans.”
Analyzing the numbers by distribution channel, the most popular destination for jeans-seeking women by far, specialty stores, expanded their share of sales among women to 41 percent from 40.2 percent in 2010, despite a 1.1 percent decline in sales to $3.2 billion. The number-two channel, department stores, performed similarly, with share up to 16.6 percent from 16.1 percent and sales down 0.1 percent to $1.29 billion.
The only store type to register sales and share improvement in the women’s market were mass merchants, which improved share to 9.2 percent from 8.3 percent on a 6.5 percent sales gain to $713.8 million. That would seem paradoxical considering the slip in sales of women’s jeans priced under $50, except that national chains, including such midtier players as J.C. Penney Co. Inc. and Kohl’s Corp., saw their sales descend 7.3 percent, to $1.04 billion, while share dropped to 13.3 percent from 13.9 percent. All other channels — off-price retailers, direct mail and e-commerce pure-plays, factory outlets, warehouse clubs and the catch-all “other” category — registered sales and share declines in women’s.
In men’s, specialty stores posted the largest gains in sales and market share, although they remain a far less dominant factor in the men’s market they are in women’s. Sales were up 5.9 percent to $1.59 billion and share up to 27.9 percent from 26.2 percent. National chains, the second most important channel for the gender, had the second largest gains, as well, with sales up 3 percent to $1.09 billion and share of dollars moving to 19.1 percent from 18.5 percent. Mass merchants had a 0.2 percent decline in sales, to $871.1 million, with share flat at 15.2 percent. Department stores increased sales 0.9 percent to $824.5 million, while their share advanced to 14.4 percent from 14.2 percent. Off-price retailers saw their sales and share decline, down 6.2 percent to $494.6 million and to 8.1 percent from 8.6 percent, while factory outlets logged the biggest slide by both measures, with sales down 17.7 percent to $337 million and share off more than a point, descending to 5.9 percent to 7.1 percent.
Although still under 2 percent on a share basis, direct mail and e-commerce pure-players did manage large increases, as sales grew 15.1 percent to $94.3 million and share reached 1.7 percent. Warehouse clubs also expanded, with sales up 8.2 percent to $122.7 million and share improving to 2.1 percent.
VF Corp., with a large presence among broadlines retailers with brands such as Wrangler and Lee, as well as a presence in the premium market with Seven For All Mankind, felt the pressures on both ends. Its Jeanswear Coalition, which includes Wrangler and Lee but not Seven, registered a 7.7 percent increase in revenues last year, to $2.73 billion, while its operating profit fell 4.3 percent to $413.2 million. Domestically, sales were up 4 percent, with a 4 percent reduction in units offsetting an 8 percent increase in unit prices. Although mass market revenues, dominated by Wrangler, were flat, Wrangler’s western business and the Lee brand grew 11 and 8 percent, respectively.
Summing up the year on a conference call, Scott Baxter, group president of VF’s jeanswear and imagewear businesses in the Americas, said, “Profitability was hindered by exceptionally high raw material costs, and unit volume was impacted by price increases. Despite these challenges, our brands gained market share across all channels — mass, midtier and specialty — [as well as] top-line growth, profitability in line with our expectations and market share gains in, arguably, the toughest cost environment we’ve ever seen.”
Cohen expects the continuation of the trend toward colored denim to give sales a boost this spring, and for patterns and coatings to help in the fall.
“About 22 percent of the market is fashion-forward and it’s a little higher in jeans,” he said. “Those customers will touch on the newer trends, but it’s got to be something that offers a clear difference.” Customers under budget pressure “will only be buying out of sheer necessity,” he added, “and they’re the ones who’ll be feeling the effects of $4-a-gallon gasoline the most.”
While the U.S. has reclaimed some production at the higher end of the denim market, China and other exporters saw their shipments decline last year, with imports of women’s and girls’ blue denim jeans declining 19.1 percent to 19.7 million dozens, while men’s and boys’ were off 12 percent to 22.9 million dozens, according to the Commerce Department’s Office of Textiles & Apparel. However, with prices higher, the value of these imports shrank less on the female side, dropping 5.3 percent to $1.92 billion, and actually growing 5 percent for males, to $2.26 billion.
Last year did see a solid pick-up in colored denim, especially at the upper end of the market. In most cases, those import figures are lumped into a separate category, colored denim trousers and breeches, but those figures also declined, to 25.5 million dozens in women’s from 30.5 million dozens in 2010, and to 17.2 million dozens in men’s from 19 million dozens.
In denim, as in all apparel and nearly all classifications of consumer products, 2011 will be remembered as the year that social media and even m-commerce made major advances, working their way to mainstream status from that of technological novelty. According to Stylophane’s tracking of Facebook and Twitter activity, among the 41 denim brands with more than 10,000 Facebook “likes” as of April 1, the total number of fans more than doubled in the course of a year, rising 177.8 percent to 21.6 million from 7.8 million a year earlier. Levi Strauss & Co. dominated the category with 11.2 million likes, just short of triple its March 2011 level, with Diesel and Guess growing 131.3 and 117.4 percent, respectively, to more than 1.8 million each. Using 10,000 likes as of March 2011 as the minimum, 15 different brands at least doubled their Facebook fan count in the 12 months through March, led by VF’s Lee brand, up 494.5 percent to 224,000; Hudson Jeans, up 395.7 percent to 80,000, and, just ahead of Levi’s, Seven For All Mankind, up 220.3 percent to 156,000.
Brands breaking into the 10,000-plus category since last March included Pepe Jeans, already at more than 900,000 likes; J Brand, at nearly 74,000, and Silver Jeans, at about 58,000.