LOOKING TO CHANGE THE MOLD
Byline: Kristi Ellis
LOS ANGELES — Junior makers, besieged by retail consolidation and the continuing squeeze on margins this year, plan to redefine their images.
The goal? Strengthen brand awareness and try to stimulate unpredictable, fickle consumers with less discretionary income by expanding, diversifying and licensing products in 1996.
Junior business has shrunk across the board in the past five years, and that trend continued this year due to retail consolidations and closings, price wars and lack of direction. But the big brands maintained and increased volume by running tighter operations and controlling their growth. Those manufacturers are expecting volume increases of 10 to 20 percent for this year, and project similar increases in 1996 based on spring and early summer orders.
But not everyone is optimistic, fearing that poor holiday retail sales could trigger chargebacks and a demand for markdown money. Coupled with fewer doors, the situation does not bode well, they say.
Areas for expansion for next year include knits, children’s and misses’ apparel and licensing, say manufacturers.
One of the biggest names, Esprit de Corp., based in San Francisco, is coming off another year of turmoil. To the surprise of many, the company closed its Susie Tompkins contemporary line this year, saying it wanted to focus more on the core junior business.
The junior division has lost ground in the last few years, moving from a high of $220 million in fiscal 1991 to a low of $70 million in fiscal ’94. Andrew Cohen, president of Esprit’s wholesale operations, attributed the decline to a decrease in doors, which fell from 2,500 in January 1992 to 1,100 in September 1993.
But he claimed that Esprit has regained many of those accounts, and currently sells to about 2,000 units. It rebuilt the business by going back into Parisian’s and May Department Stores Co., he said.
For fiscal 1995, Esprit’s junior volume went to $110 million over 1994’s $70 million, and Cohen predicted an increase of about 12 percent for the calendar year 1996.
“Our junior business has been difficult,” admitted Cohen. “But we believe that we have an opportunity on the career side, which has grown from 15 percent of our business to about 30 percent.”
Esprit’s biggest challenge has been overcoming the demands for quick response because it sources primarily in the Far East. Cohen said the company will try to shift more production to the U.S. and Caribbean Basin in the next few years.
One of the bright spots in the business has been its license with the Dr. Seuss characters, which launched this year. That division will finish with $20 million in wholesale volume, according to Cohen.
The New York-based junior firm Necessary Objects plans to lower its price points and sign its first licensing agreement in 1996, according to Ady Gluck-Frankel, president and design director.
Currently, Necessary Objects’ wholesale prices range from $8.75 to $32.75 but Gluck-Frankel said they will go down 20 percent to $7 to $25.75.
“Being an East Coast manufacturer, we are trying to work more closely with our contractors to be more price-competitive on the West Coast,” she said, adding that the company, a major junior brand, has had spotty business with a slight increase in volume over last year.
To maintain a steady business, Gluck-Frankel said she is seriously considering expanding into constructed looks as well as knits. She also plans to license lingerie next year, which could mark the first step before going into her own retail stores in 1997 or 1998. The company is also planning to expand its international business to England and France.
Key items in 1996 will include long bias skirts that sit on the hip, stovepipe pants, hip-hugger short shorts with a two-inch inseam and cuff, snap front shirts and a return to Hawaiian camp shirts and tropical prints. Novelties will be key in 1996, as will laminated fabrics such as vinyl and plastic-coated goods.
“What blew out in November was fashion, but there wasn’t enough of it in the stores to counterbalance the poor selling of the basics that stores did their key buys in,” said Gluck-Frankel.
Barry Sacks, chief executive officer of Chorus Line Corp. here, doesn’t deny that times are tough. Even with a projected 15 percent volume increase in 1995 to $252 million, Sacks said he has had to keep the operation tight, a strategy that included the cutback of 42 full-time and part-time jobs in August and September.
But he remains optimistic, projecting 1996 sales of $280 million to $290 million.
“In order for any manufacturer to survive in the near future, they will have to tighten their belts,” said Sacks.
If the timing is right, Chorus Line Corp. could make a public offering in 1996 as well as expand its production base and distribution channels. The 20-year-old junior dress house is also considering two more apparel categories: large sizes and misses’ sportswear.
Although All That Jazz, the original label, appeared only on dresses, it now accounts for less than 50 percent of sales.
Another of the few junior brands that has grown dramatically in the past four years and is on the verge of expanding into licensing as well as other divisions is Vernon, Calif.-based XOXO. XOXO’s president, Gregg Fiene, projects a 20 percent increase in volume in 1996 to $60 million.
Fiene, who is currently expanding his showrooms in Los Angeles and New York, is also adding 43,000 square feet to his current 73,000-square-foot manufacturing and shipping facility in Vernon.
Fiene said he doesn’t plan to curb development to save money, which he said has been a strategy of other companies.
“Approximately 40 percent of my expenses are in design and product development,” he said.
In 1996, Fiene has planned controlled growth, which will include signing some licenses. He’s been talking about categories such as denim, footwear and optical companies, but said he will keep a tight control over packaging, advertising and image.
Fiene said he plans to launch a new line in February, tentatively named Lola By XOXO, but would not elaborate on the category niche.
“The challenge in the next year is staying alive in the shakeout and staying on top of your business and not overexpanding,” he said.
Many other junior manufacturers continued to struggle for a foothold in the ever-shrinking retail market and some managed to stop the downturn.
Jalate Ltd. here posted a loss of $14,000 for the nine-month period ended Sept. 30.
“This year, to be even is a miracle,” said Phil Levin, chief financial officer of the company. “The retail environment is terrible, and the stores are killing the manufacturers.”
Levin said 1994 was especially rough for manufacturers because there was a “preponderance” of markdown requests by retailers throughout the year. Department stores are the worst offenders, he claimed.
Levin, who believes the industry goes through four-to-five-year cycles, predicted that the first quarter of 1996 might be a little easier with a big break coming in the second quarter.
“We are at break even now, but who knows how the fourth quarter will be?” he declared. “A disastrous December could kill the whole quarter.”
Jalate will concentrate on its core knit and dress division, he said, and “quit fooling around with areas they can’t control.” The company will focus less on misses, wovens and kids, he said. Cut-and-sewn knits will be key for the second and third quarters of 1996, according to Jan Grossman, Jalate’s vice president of merchandising and design. Knitwear in general will continue strongly into next year, said Grossman, with synthetics, textures, stripes, halters and T-shirts leading the pack. Bottoms with a retro Sixties feeling are also going to be an important trend.