EXECS BEMOAN DOLLAR SLUMP
Byline: Godfrey Deeny and Katherine Weisman
PARIS — French fashion executives contemplating this month’s ready-to-wear season have one major headache: the dollar. The greenback’s tumultuous plummet — it has fallen 7 percent against the French franc in the past seven weeks alone — has caused considerable alarm in fashion circles here, and some company presidents are predicting that most sales increases in the U.S. will be wiped out by the currency’s decline. Executives are also aggravated that the currency chaos comes at a time when business in the U.S. and the new economic dragons of Asia — though not Japan, due to the Kobe earthquake — have been building. Given the dollar problems — compounded by the cheap lira, which means that powerful rivals in Italy may have a pricing advantage — price hikes are rare this season in Paris.
And most French houses remain confident of receiving sizable orders from U.S. department stores this season, even though no one is predicting that U.S. buyers will come to Paris with huge open-to-buys.” “The dollar’s slump is extremely worrying,” said Mounir Moufarrige, president of Karl Lagerfeld and ChloA. “But fortunately we are a worldwide business and not dependent on any one country. “And the most important thing is not just price. It’s the overall product proposition, the relation between the quality and finish of the garments as well as their price. That’s what determines their sell-through,” he added, playing down any Italian advantage.
Moufarrige said pre-collection selling of both ChloA and Lagerfeld in New York had shown “very good progress compared to fall-winter last year. There’s definitely a good feeling in the U.S.” At Emanuel Ungaro, managing director Carlo Valerio said that as 20 percent of Ungaro’s business is in the U.S., the house would inevitably be affected by the weakening dollar. “Our business in the U.S. has been growing steadily, but this year that will probably all be offset by the dollar,” he lamented. He added that the house’s new flagship boutique in New York had helped catalyze sales in North America and predicted that the store will post sales of $3 million in 1995. In the U.S., all three Ungaro rtw lines have shown solid sales gains this year, he said. Emanuel rose 46 percent in the first two months of this year compared with the same period last year, Sola Donna scored a 13 percent rise and Parallele advanced 18 percent.
Thierry Mugler president Didier Grumbach said Mugler had doubled his U.S. turnover in the past two years, but would not provide any figures. “The U.S. is now our largest market, about 30 percent of our sales, which is about the right level. And we have achieved this without adding new stores. What’s important is that we have a limited but strong distribution and a very good organization in New York,” he said.
The dollar would not be a huge headache for luxury ready-to-wear, Grumbach argued. “But for designer sportswear, which is very stratified, it will have a big effect.”
Richard Simonin, president of both Givenchy and Kenzo, said, “The only market that is worrisome, especially for Kenzo, is Italy. The weak lira makes our products expensive.”
Last year, Givenchy posted double-digit profit growth, Simonin said without disclosing figures. This came on flat sales, due mainly to the reorganization of the brand’s licensing business. In the U.S., Simonin said that the dollar’s weakness this year has not affected the sales for Givenchy’s luxury rtw. “We are just not feeling an effect,” he insisted. As for Kenzo, the brand is being relaunched in the U.S. with the new Kenzo Studio collection. And as for the brands’ performance in their home market and Europe, Simonin feels the economy is not as bad as people think. “Even if consumers are more careful, they are still interested in fashion,” he observed. “Both brands are doing well in France.”
Like other executives, Sonia Rykiel vice president Simon Burstein is very concerned about the dollar. “It’s certainly going to hurt, ” he said.
But Burstein nevertheless predicted that the house will score a double-digit increase rise in sales this season. “We achieved that for the spring-summer business,” he noted. Groupe Guy Laroche is trying to overcome losses that began in 1991 and continued through the first half of last year (1994 figures have not yet been reported). “I think we will turn around soon,” said Jean Jacques Schmoll, the director of Laroche. “It’s very hard in France right now, but the export markets are doing much better.”
Schmoll said that Laroche’s recently renovated New York store on 57th Street reported sales growth of about 70 percent in the first two months of this year, compared to the same period last year.