NO PANIC IN DENIM

Byline: Scott Malone / Joshua Greene

NEW YORK — Jeans are managing to stay above the fray.
Although the recession has proven devastating to many apparel categories, it hasn’t been as hard a hit for the jeans business. While executives admit that the strong growth they enjoyed early in the year has slowed, they said the category is still healthy.
Vendors said volume has continued to grow over the past couple of months, and while they’re making modest plans for 2002, they’re still expecting an up year.
Designers are continuing to push low-rise looks, which they expect to work their way into the hands of mainstream customers next year, although at a more modest height than some of the plunging silhouettes in vogue on the West Coast. They also expect boot-cut styles to become an important basic, as well as interest in new washes and treatments of the fabric itself to spark consumer interest.
Diesel is expecting to continue its growth next year, though at a slower pace.
Andreas Kurz, chief executive officer of Diesel USA Inc., the Italian firm’s New York-based arm, said: “In only two years, we basically doubled the size of our business here.”
Diesel’s 2001 sales in the U.S. market are expected to come in at $91 million, about 20 percent ahead of last year and representing 18.1 percent of Diesel’s $502 million in worldwide revenues.
“You cannot expect the same next year, but we will still grow, especially through the retail channel,” Kurz said.
The company plans to open six to eight new stores in the U.S. next year, which would raise its store count here by as much as 50 percent.
Joe Krafka, president of Earl Jean Inc., the Los Angeles brand that was acquired by Nautica Enterprises Inc. in May, said: “Our business year to date is up. It’s not exactly what we had planned it to be and it has slowed down a bit, but overall we’re up.”
While Earl is expecting to grow next year, it’s prepared to work a little harder for the additional sales. The five-year-old brand plans to take advantage of its new corporate backing to continue to raise its profile and expand into more product categories.
It is increasing its offering of knit and woven tops and has added shoes and accessories. For fall, the company plans to roll out a men’s jeans line.
Nautica Jeans Co., which entered the women’s market in fall 2000, is expecting to advance in the year ahead.
“The whole status category has been holding its own and we’ve grown substantially,” said Sandra Campos, senior vice president of women’s at the New York-based company. “Traffic is down at the stores, but we have been able to get a larger portion of the shoppers.”
She added that the company expects to increase its store distribution nationwide by 36 percent this spring, expanding its presence in Florida and the Midwest.
While it’s easy for newcomers to increase from a relatively small sales base, more established brands also are expecting to boost their sales next year. They’re betting that strong consumer demand for denim will help the category to do well at a time of economic uncertainty.
At Merriam, Kan.-based Lee Co., president Gordon Harton said recent business has “been slightly below our expectations.”
“The economic slowdown is a little slower than we would have expected. But our brand is performing well,” he added. “Based on what’s going on, we project [2002 sales] to be up slightly. “
Polo Jeans Co. also said its business has held up over the past few months and expects growth next year.
The Americana merchandise, which is our heritage, has been very strong and continues to perform well,” said Kimberly Hill, senior vice president of women’s sales at the New York-based division of Jones Apparel Group. “We hope for a good year ahead. We’re planning for slight growth.”
Many executives said there is a direct relationship between the age of their customer base and how much the uncertainty about the economic situation affects sales.
Campos attributed the relative youth of Nautica Jeans’s customer base — 22 to 35 — to its continued growth.
“Status is a younger zone and the younger consumer is still spending her money,” she said.
At Los Angeles-based junior brand LEI, president of sales and marketing Spencer Rosenheck said he’s planning for a 10 percent gain next year, since juniors’ spending habits are not heavily influenced by world events.
Some executives have started to wonder what will happen to demand for high-end, $100-and-up jeans as the heady economic times of the past few years become a memory.
“When consumers are faced with this type of situation, they look for value,” said Lee’s Harton.
Similarly, at New York-based Tommy Jeans, president Todd Howard said: “You have to be more special to people. People have to feel like they’re getting value. In juniors, that trend has been there all year, but it’s become more exaggerated” over the past few months.
He said Tommy Jeans’s approach has been to try to pack more features into products at its current price points rather than to lower prices.
Still, high-end vendors said they think there will still be a core group of denim enthusiasts willing to pay big bucks for a really distinctive pair of jeans.
“Ultimately, there’s a certain customer that wants to buy a certain product,” said Scott Morrison, president of Paper, Denim & Cloth, which is owned by New York’s Mudd Inc. “Our market is a niche market, so I don’t think our customer goes away when the times are tough.”
Morrison said continued innovations — the company next fall plans to rely heavily on high-end Japanese denims, including air-spun yarns — would attract consumer interest.
Another debate that flares up when spending slows is whether it’s better to push the fashion envelope, to induce consumers to buy something they otherwise wouldn’t or to veer towards basic looks because consumers want to be sure they’ll get a lot of wear out of something.
“There are two sides to denim going forward,” said Michael Silver, president of Winnipeg, Manitoba-based Silver Jeans. “There’s the fashion denim look, which tends to be more junior in nature. Then there’s the other side, which is about vintage and washes, but not done in a sparkly way.”
Harton said Lee had seen a pickup in sales of basic five-pocket jeans, which he expects to continue as a result of the soft economy.
“As the economy gets tough, the tendency is to get back more to basics. We’ve seen that before,” he said.
While strong demand for denim in all shapes and forms — jeans, dresses, skirts, jackets and accessories — drove business in 2001, some executives said they’re starting to diversify their fabric offerings. They noted a rise in demand this fall for corduroy in basic five-pocket silhouettes.
LEI’s Rosenheck said he plans to aggressively push nondenim products in February and March.
“There’s some interesting treatments applied to twill and corduroys that give it a jeanswear feel,” he said.
Seattle-based Sergio Valente also is starting to hedge its fabric bets, said president Steve Miska, boosting its offering of pile fabrics.
“We’re adding more fabric because fashion needs to have different looks. We think fashion fabrics are important,” he said, adding that the company plans to emphasize corduroy and velvet for fall 2002.
In general, executives said they plan to keep their guard up over the next few months. While they’re pleased that the recession hasn’t hit the jeans business as hard as it has other categories, they’re taking nothing for granted.
“We’re not deluding ourselves,” said Tommy’s Howard. “We’re trying to take all the lessons we’re learning in tough times and hold on to them.”

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