THE DRAWBACKS OF A ROSY ECONOMY
Byline: Anne D’Innocenzio
NEW YORK — Bob Salem, marketing director at The Leslie Fay Cos., thinks the Internal Revenue Service’s move to increase the total pretax limit by $500 for 401(k) contributions next year is not good news for the apparel industry.
“That’s a negative for us,” Salem said. “We are looking for available spending power, and that gets reduced when more is taken out of a woman’s paycheck. I see it as $500 less she will spend on apparel. We have to compete with her spending on college tuition and health care. We are not just competing with our competitors.”
“OK, so their 401(k)s are getting bigger, but our customers can’t really touch that money. That’s for their retirement,” said Charles Sobel, president and chief executive officer of Jenna Lane Group. “There are a lot of worries out there.”
Despite a robust national economy and a low unemployment rate of 4.1 percent, apparel executives who target the middle-income consumer said they did not seeing many reasons to celebrate.
Sure, executives are encouraged that consumer confidence is up. But they acknowledge that it hasn’t affected day-to-day spending power. And they believe that in the next six months, they’ll need to do a lot more hustling to get their audience to buy apparel.
Clearly, the moderate market has been in a funk, with sales worsening this fall. Increasingly, the category has been squeezed on all fronts. Promotional activity in the better area of department stores and heavy competition from such chains as Old Navy and Target Stores, which are serving up attractive fashions at low prices, are a problem. Many store and apparel executives also gripe about a saturation of basics and a lack of multipurpose clothing on the selling floor.
Not every moderate supplier is getting bruised. Among the exceptions are Kellwood Co.’s Sag Harbor label, which has been a stellar performer, and Liz Claiborne’s special markets division, which is expecting double-digit sales gains for the first half of next year.
“There are a lot of options out there for the consumer,” said Kim Roy, group president of Claiborne’s accessories and special markets, which include Crazy Horse, Emma James and Russ. “You really have to capture the consumer with a focused product line.”
She added that the company’s moderate business had been successful because of its strong emphasis on novelty at a price.
Roy said she wanted to increase the number of doors that carry the company’s moderate and mass lines and expand into special sizes. The company’s Russ label, aimed at the mass market, is expected to increase to 1,800 doors from 1,600 for the first half, Roy said. Large sizes are slated to be in 850 doors, up from 650.
The company will also roll out large sizes in Crazy Horse, which is exclusive to J.C. Penney, and Emma James, its upper-moderate label. It is also increasing popular-priced Villager’s distribution in misses’ sizes, large sizes and petites.
Other moderate companies are adopting more aggressive measures, including reducing the number of styles and increasing their selections of versatile clothing.
Leslie Fay, where the sportswear division is expected to post $60 million in wholesale volume this year, is employing a number of strategies to fight off moderate’s malaise.
The most drastic step is combining Haberdashery, its basics collection that was resurrected two years ago, with the more fashion-related Leslie Fay Sportswear. The move will be implemented for fall selling, according to Salem.
The merged collection will be called Haberdashery by Leslie Fay Sportswear.
The aim is to reduce the number of stockkeeping units by 20 percent and be more responsive to trends, he said. Each group will now have 18 sku’s.
Salem said the overall collection would be more versatile. Leslie Fay is de-emphasizing heavy wool flannels and increasing its crepes and gabardines. It is also putting more emphasis on stretch.
“We are trying to give her a product that is versatile, that is more casual and that offers novelty,” Salem said.
The average wholesale price for spring will remain $18, and Salem believes first-half business will be as much as 15 percent.
Still, he said, “it’s been tough.”
“Moderate hasn’t been the number-one hit parade,” he said. “Consumers are buying better on sale. Many of the stores have too many sku’s. We see too much structured clothing, and not enough multipurpose clothing. We have to lighten up, and get a little less serious.”
Jenna Lane is pinning its hopes on the knit bottoms business, which Sobel believes is coming back. Another strategy is adding more novelty while reducing prices for JLNY, its imported line, by 10 to 15 percent. For spring, the line will wholesale from $9 to $16, Sobel said.
With its Jenna Lane collection, the company is scrambling to get better fabric buys. As a result, Jenna Lane’s prices for spring have come down 10 percent and now range from $5.50 to $11.
Sobel said the licensed large-size Bongo collection, aimed at teens, will feature more novelty embroidery. It had been focused on basics.
All these strategies have helped, Sobel said, adding that spring bookings were ahead 35 percent.
“Business has been so difficult,” said Lynn Fish, executive vice president of merchandising at McNaughton Apparel. “We started seeing a downturn with fall. For some reason, business completely dropped off.”
Fish added that as the jacket business softened, McNaughton had been forced to sell two sweaters for every jacket. She noted the company’s millennium-themed business, which includes sparkly sweaters, wasn’t happening at retail either.
About 60 percent of McNaughton’s holiday collection was in beaded looks, which did not do well, she said.
If stores don’t get more aggressive with markdowns, they will be flooded with inventory, and there will be no room for spring receipts, she said.
Fish said the company had made a few adjustments, based on fall selling, and was expecting business to be up 10 percent for the first half.
For spring, Norton McNaughton has downplayed embellishments and opted for soft, structured, cleaner looks, she said.
John Paul Richards, whose sales at retail were bruised by delivery problems in the third quarter, is expected to rebound.
One of the company’s key sweater suppliers, based in Korea, went out of business, and the firm was forced to reroute its production to Hong Kong in the fourth quarter, according to Bertran Kalatchi, a partner. Kalatchi described the loss as “sizable,” but said he expects double-digit gains for the first half. Overall volume for 1999 is expected to be from $130 million to $135 million.
“Our career portion of the business is doing very well,” Kalatchi said, adding that the company had softened the look with crepe blends.