THE BASICS ARE BUILDING THE BUSINESS
Byline: Janet Ozzard
NEW YORK — Basic five-pocket jeans ruled the denim universe in 1994 and will do so again in 1995.
While the item business — including dresses, vests, overalls, shirts and jackets — became an important source of income for some more fashion-oriented companies, basic jeans and shorts business dominated the market, according to the nation’s key producers.
The trend apparently paid off. According to a recent study by consulting firm Kurt Salmon & Associates, NPD Purchase Panel data pointed to an 8.3 percent increase in unit sales of women’s jeans for the 12 months through August.
The trend, though, according to NDP, may be losing strength, with only a 2 percent gain projected for the next 12 months.
Nevertheless, makers indicate they’ll still be sticking primarily to a basic course, but are looking to build plus figures in 1995 with several strategies:
Subtle changes in the primary product — five-pocket jeans, coming from fabric and dye techniques rather than from new silhouettes.
International expansion, through retail stores or wholesale sales.
Working with stores to increase the use of Quick Response and automatic replenishment.
Extending product lines, either with licensing deals or by expanding current collections.
Companies from Guess to Lee to the mass market brand Sasson expanded their assortment of denim-related items such as jackets, dresses, skirts, woven and knit tops and denim shirts this year. Sasson even went so far as to establish a new division just for sportswear, to create broader name awareness across the board.
Mackey MacDonald, president of VF Corp., which owns the Lee Apparel Co., Wrangler and the North American Marithé & Francois Girbaud business, said the five-pocket business will continue to dominate VF’s denim business and predicted a 10 percent increase overall for next year.
“There are no major trends developing outside five-pocket,” he said. “But that business is changing. It’s becoming more customized for consumer segments, as far as fit, finish and product.”
He admitted that Girbaud, which has been a soft spot in VF’s powerful denim lineup, continues to struggle to rebuild its business.
“We have had trouble with Girbaud,” he said. “We feel like we’re not offering the best value to the consumer. We did bring in a new management team that has focused on the American consumer. We felt that Girbaud’s global approach to business, which comes out of its Paris headquarters, didn’t focus on the American consumer. “One aspect of that is the consumer here, no matter how sophisticated, has a price ceiling. We’ve addressed the question of prices by introducing our MFG line this year. That brings basics to the market at around $40 to $50.”
But in a marketplace where image is a large part of the attraction for consumers, Girbaud continues to eschew print and TV advertising. This year, it mounted a small print campaign in consumer magazines, but MacDonald said that probably would not continue.
“There are different ways to communicate,” said MacDonald, explaining that next year, Girbaud would be doing most of its image building through in-store marketing. “We have to communicate to the consumer why they are smarter to buy our jeans. Much of that can be done in-store.”
Lee, on the other hand, MacDonald said, has done “extremely well,” with growth exceeding expectations. It has extended its product line to include more fashion washes and cuts, related products such as knit and woven tops, and new fibers such as Tencel.
“We continue to see double-digit increases in both units and volume,” added Gary Dawson, vice president and brand manager for Lee brand. He added that while the silhouette remains essentially unchanged, there are subtle changes in “cuts and finishes,” such as various dyeing, bleaching and surface treatments.
While MacDonald said that much of Lee’s growth for next year will come in the junior area, he noted that junior and misses’ are not as separate as they used to be.
“The junior area is certainly a growth area, and it’s not just due to jeans,” he said. “It’s also products worn with jeans: jackets, tops, vests and denim shirts. These categories are growing very rapidly. But the difference is becoming more of a fit difference; the misses’ market is also moving to the latest finishes.”
International expansion is high on MacDonald’s list for next year, he said. The company introduced the Maverick line to European mass markets this year, MacDonald said.
Where there was fashion, it was in the form of dresses, skirts, shirts and related denim pieces. For Maurice Marciano, chairman and chief executive officer of Guess Inc., those elements made 1994 a banner year.
“We’ve been able to ship whole new groups of vests, dresses, skirts, sexy little T-shirts,” he said. “Everything is more fitted.”
Other innovations came from new fiber and fabric treatments, he said, including a new yarn dye treatment.
Marciano said that based on agreements signed this year, Guess’s international growth in 1995 will be significant.
The company signed several licenses this year, including one with Japanese company Itochu to oversee Guess’s business in Japan, and also increased its presence in other Asian and Pacific Rim countries through licensees and agents.
Next on the agenda is South and Central America, he said.
“We just signed a new distribution agreement with a company in Panama for Colombia, Venezuela, Honduras and Costa Rica,” he said. For European business, Guess has opened a design studio in Florence that will design product just for the European market. Distribution to Italy and Spain is also handled out of that office.
Marciano added that Guess plans to continue opening its own stores domestically as well as internationally — 20 Guess stores as well as 15 to 20 licensed Baby Guess and Guess Home stores will open in 1995, he said.
In fact, retail stores are big news for the denim business.
Levi Strauss & Co. made headlines with its plans to open 190 retail stores in the U.S. over the next five years. Levi’s has long had freestanding stores in Europe, run by agents, and has slowly opened some stores here through an agreement with retail partner Designs Inc.
But earlier this year, it announced plans to cease distribution to its smallest accounts, followed by a request to the FTC to clarify that a 1978 consent order did not prevent the firm from opening its own stores.
That request is still pending.
Most recently came the opening of its first company-owned store in London last month (see related story, facing page).
Domestically, the five-pocket trend kept Levi’s wholesale business hopping.
“We had a 40 percent increase in 1994 over 1993,” said Margie Hanselman, merchandise manager, Levi’s jeans for women. “The trends, while it might sound boring, were ‘more of everything.’ One of the interesting things, though, is that there seems to be a shift in silhouette toward a relaxed fit. Our biggest business is still in junior, and that customer has been focused on skintight for a couple of years. I think it might be related to the amount of advertising there’s been lately for loose fits for men, and that may be moving over to the target 14-to-19 group in girls. They’re wearing them loose and slouchy, with a tiny top. And with looser fits, you get the trend and the volume customer.”
Shorts were still very important, she said. “In 1994, nobody had enough. We’re expecting them to triple off this year.”
As for dyes and finishes, Hanselman said that variations on blue indigo, including bleaches, dark indigo and blue-black overdye, were the mainstays of the line. Other important looks included deep colors such as crimson, green and honey brown, as well as a group of “linen-look” jeans with slubbed fabric.
Overalls, Tencel jeans and stretch denim are a smaller part of the business, Hanselman explained.
“We’re just starting to test Tencel,” she said. “Overalls and shortalls have been around for a while, but they are becoming more and more price-driven, and we’ll never be the cheapest on the block. And while we didn’t have a big response to stretch in spring, we kept it on the line. That look, which we’re seeing in Europe — lean but not tight — won’t take hold here for another year or so, so we’ll wait it out.”
The dim note for 1994 was that companies who don’t have the distribution or pricing to compete in the basic game, or don’t have the dollars to put into building image, found business in a slump, sometimes seriously so.
Dick Gilbert, president of Zena, said his business was down 18 percent this year.
“Our novelty jeans never took a hit,” said Gilbert, “The whole drop was in basics.”
His plan for next year is to drop prices on the basic line to $15 or $16 wholesale from the current $17.50.
Gilbert also noted that the deal he was working on with Sun Apparel to merge the two companies had fallen through, although he declined to elaborate on the reason.
At the mass source Chic, Robert Luehrs, president, said that he thought business would be up about 20 percent over 1993, due largely to the good five-pocket business.
Luehrs said that retailers are complaining that their margins are getting smaller as five-pocket gets more and more competitive, but he said that so far, they have made up the difference in volume.
In addition, he said, the shorts business has eliminated the traditional spring denim doldrums.
Advertising is becoming increasingly important at the mass level, Luehrs said.
“As it becomes more of a commodity business, the only difference for the consumer is going to be the name,” he said. “Our advertising budget is leaping to take care of that.”
In a related area, Luehrs said that Chic’s 24 licensed products will do about $90 million wholesale this year, with $130 million projected for next year.
“I never thought all this licensing stuff would work,” he said. “I remember when I said, ‘Who’s going to buy a Chic bra?’ But it’s our most profitable license. The consumer appreciates your quality in one area, so they buy other products with your name on them. Also, the mass stores don’t have as many brands as the department stores do.”
In fact, expanding name recognition to other product areas is one way to grow business when the basic-five pocket peters out.
At the mass market Sasson Licensing Group, chief executive officer Stephen Wayne said that the biggest business development there this year was the creation of a separate business that focuses on licensing the name to sportswear rather than denim companies.
“Denim only grew a little bit, but we were able to grow the business in denim-related areas, and we are expanding the product mix to be more sportswear-driven. We have more fixturing in the stores, and we have increased our replenishment and EDI programs,” he said. “We’ll have a new ad campaign for back-to-school 1995.”
At Sun Apparel, president Eric Rothfeld said that his two new brands, the misses’ brand Code Bleu and the junior mass brand X-Am, had met projections for their first year in the market. Rothfeld said earlier that he planned for each to hit about $10 million wholesale this year.
Sun Apparel also holds the license to manufacture Sasson jeans, which he said had a “steady, strong performance this year.”
“What we’re offering now is custom automatic replenishment. The problem is that many of the stores are starting to look identical, but there’s a range of fits and proportions.”