SPECIALTY STORES: A GOLDEN YEAR
Byline: Thomas J. Ryan
NEW YORK — Brands continued to fuel the biggest earnings and sales gains for apparel players in 1999, but specialty stores seemed to be taking more of the action.
The phenomenon was particularly seen among those chains catering to youth, like Abercrombie & Fitch, American Eagle Outfitters, Hot Topic and Pacific Sunwear. But even those focusing on an older group, such as Ann Taylor, Talbots, Banana Republic, Brauns, Bebe and the Limited’s women’s division, delivered robust same-store gains in 1999.
The strength in these branded concepts led the specialty store group this year to strongly outperform department stores — the group that created the mega-brand buzz in the first place. The lack of prominent brands was said to particularly hurt middle-market retailers such as Sears, Roebuck and J.C. Penney.
Price was also still big in the consumer’s mind as the two discount leaders, Wal-Mart and Target, seemed to distance themselves from the pack with aggressive expansion programs. Kohl’s and Old Navy were also big winners, which analysts said was due to the formats’ low prices and easy shopping environment.
But some vendors continued to perform well in department stores, particularly Jones Apparel, with its licensed Ralph Lauren lines, and Tommy Hilfiger’s women’s and junior lines. Wall Street rewarded turnaround efforts at Guess, whose stock was up 273 percent in the first 11 months, and Norton McNaughton, which was up 205 percent in the period. Facing a maturing department store channel, slower growth in their core brands and the constant need for growth as public companies, many apparel vendors were looking for mergers this year, but much of the action took place in Europe among luxury players, especially LVMH, Gucci, Pinault-Printemps-Redoute and Prada.
In the U.S., Jones Apparel Group swallowed Nine West Group and Liz Claiborne acquired Lucky Brand Dungarees, Segrets and Laundry, and entered into major licensing deals with Kenneth Cole and Donna Karan International.
But many suppliers who said they were hungry for acquisitions, including VF Corp., Kellwood, Norton McNaughton, Leslie Fay and Nautica Enterprises, made no major deals this year, so 2000 is projected to be another year of marriages.
On the retail side, mergers included Ames and Hills Stores, ShopKo and Pamida, Dayton Hudson and Fedco, and Federated and Fingerhut.
Several marriages also took place among financial players with Fleet Bank’s merger with BankBoston and CIT Commercial Service’s acquisition of Heller Commercial and Congress Talcott. General Motors Acceptance Corp. officially entered the factoring business with its acquisition of BNY Financial.
Wall Street generally ignored apparel and textile stocks and most retail stocks in favor of blue-chippers and technology issues. Indeed, some catalog retailers such as Lands’ End, up 124.1 percent in the first 11 months, and Speigel, up 39.1 percent, clearly benefited from touting their e-commerce prowess. Intimate Brands, which drew more than just voyeurs to its launch of victoriassecret.com site, soared 50.7 percent in the first 11 months. And of the 12 apparel-related firms that went public this year, eight were focused on the Internet.
Fashion — not basics — was an important business driver this year, and mistakes in fashion choices hurt chains such as Gap, Wet Seal, Stage Stores and Goody’s Family Clothing. Nordstrom, which also struggled, plans to emphasize more contemporary looks, including the rollout of BCBG in-store shops.
Slack demand for basics hurt such suppliers as VF and Fruit of the Loom, and led to the bankruptcy of Tultex. The athletics apparel and footwear market went through another tough year as evidenced by the liquidation of Starter Corp. and Jumbo Sports as well as the bankruptcy of Just for Feet.
But most vendors who filed for bankruptcy did place heavy blame on the retail climate. London Fog Industries filed in order to close some poor retail units, while Sirena Apparel filed after becoming embroiled in an accounting scandal.
Although it was a fairly light load for retail bankruptcies this year, the filing of Loehmann’s and Filene’s Basement left some with unpaid bills. Some notable smaller filings included Barami, J. Peterman and Evans. What seemed worse for vendors was liquidation of Caldor, Upton’s and T. Eatons, which left many a supplier searching for shelf space. The year also saw a continuation of the trend toward moving quickly to liquidate instead of attempting to reorganize.
The textile market was particularly hard hit last year as it faced myriad problems and had to pass along increases in fiber prices. While vendors continued to complain about retailer’s request for price concessions, those vendors seemed to be just as aggressive in hunting down lower prices from fabric suppliers.