FALL ORDERS ON TRACK, FOR NOW
Byline: Shirliey Fung
NEW YORK — It was already a rough month, and last week’s stock market tumble only added to the consternation brought on by dot-com closings, waning consumer confidence and proclamations by President Bush that the economy was headed for recession.
The middle-class is typically the most impacted by economic downturns, and mainstream vendors would therefore feel the pinch. But moderate and better vendors, which were in the midst of selling their fall lines to retailers last week, said that stores are still buying — indeed, many vendors have increased their same-period volume — and that they have yet to feel the major reverberations of the souring economy.
But those same executives also said that signs were definitely pointing toward times becoming tougher, most likely once stores start to make their replenishment purchases.
Since March retailing has been weak on the whole, a result of a myriad of factors, including bad weather and declining consumer confidence, many buyers, especially ones from the smaller specialty stores, entered the fall buying season with a touch of trepidation.
“They’re a little more cautious, a little bit more selective,” said Jason Tynan, chief executive officer of Finity, a better sportswear firm. “Open-to-buys appear to be flat.”
Laura Vasquez, executive vice president of design and merchandising for Perry Ellis Sportswear, said: “What people are trying to do is be very realistic. No one has planned increases.”
Kenneth Zimmerman, ceo of Emma Black, agreed that stores were still buying, but at a more methodical pace.
“I tend to think that they’re holding their money,” Zimmerman said. “Instead of mailing in their order in five days, they’re taking 10. The small stores are very nervous and very cautious. They’re reviewing the lines twice. They’re ordering, it’s just double the work to get the same order.”
Stanley Kitman, president of Pretty Talk, a moderate and better blouse house, said: “It may have a delayed affect in the next few weeks. Right now, retailers are still looking for merchandise. They still have to fill their floors with new goods, but they seem less willing to book far out. They’re booking more within a period of six weeks to two months, as opposed to three to four months.”
Kurt Erman, president of moderate vendor Notations, said many of his retail customers have told him that the tough economy is going to lead to a highly promotional environment in the next few months.
“We’re going to have to wind up giving more markdown money,” he said. “We are going to have to generate and do promotional price points so that stores can maintain their margins.”
Erman said that his retail customers are concerned about the blue-collar worker.
“The stores are starting to feel the slowdown,” he said. “They feel that going forward it’s going to be tough and tight, and that they’re going to start promoting. But things haven’t hit yet, it’s just a projection.”
Mark Weinberg, vice president of sales and marketing for better sweater vendor Chandail, said: “All signs are leading to a recession. However, on the retail front, we have not seen the effects of it yet. Going into the fall season, people need merchandise in stores. When people do not come into the stores and the stores start stocking for transition, then that’s when the reorders may stop coming.”
He added that he felt fortunate that Chandail bowed into stores last year instead of this year.
“It was even a little tougher for people to acknowledge a new resource last year,” said Weinberg, who has started up several apparel companies in the last 15 years. “But it may be even more difficult to break in this year. Retailers will stay with what they’re doing well with.”
What stands to do well is key items and novelty apparel.
“In a tough economy, the two best words are ‘key item,”‘ said Lou Breuning, president of August Silk.
Kitman said that instead of purchasing collections, retailers are buying more new items each month. This has put pressure on Pretty Talk to introduce even more new items into each new group.
“In the 25 years that I’ve been in the business, whenever things are difficult, it’s when I’ve done great with items. Bookers are not coming in and buying collections and 25 styles. They’re buying narrow and deep and buying trendy items, not basics,” said Zimmerman. “The only thing that she’s going to buy is something that turns her on and something that she doesn’t have.”
“She’s still buying clothes, she’s just not going to be extravagant,” said Vasquez. “If she’s going to cut back on spending, she may not buy a new suit, she might buy a piece that she can update her wardrobe. It justifies novelty, because if you don’t replenish, she might just pass.”
“Women will be a little tighter with their wallets. But she will make an exception for something that’s different as opposed to something that’s a basic,” said Weinberg who believes that Chandail’s novelty sweaters with leather detailing and its fake fur vest will be strong sellers.
Marty Brody, division ceo of Kellwood Co.’s Sag Harbor division, said: “There’s definitely been a cutback on basic goods. It’s been replaced with newer, fresher novelty goods. Basic goods is the most challenging piece of business out there for most moderate resources.”
But some buyers are taking a more conservative approach, booking items that tend toward the classic and preppy.
“When people become cautious, they pull back a little bit, take less risk,” said Kitman. “But it’s crucial that they don’t move away from fashion. Stores will not look new and looking new is what brings customers in.”
Vendors are also watching closely to see if the Senate passes President George Bush’s proposed $1.6 trillion tax-cut plan and whether the Federal Reserve Bank, which made its third reduction this year on Tuesday by cutting the prime interest rate by half a percentage point, continues to take that rate even lower.
“I don’t think it’s going to hurt+if it puts more money out in the hands of the people out there,” Brody said. “But we can’t lose sight of the fact that the moderate customer that we’re talking about has a very limited disposable income. We have to work extra hard to make sure we offer her the kind of value that she’s looking for.”
Zimmerman believes the tax cut will only have an effect if it is retroactive. “It will be a plus, but not a great plus, and only if people feel it in their pocket immediately,” he said.
“All those things play on her mind,” Vasquez said. “It makes the confidence level go up.”
But others questioned whether a tax break would have an effect at all.
“A short-term tax cut will revive confidence. The question is, will the confidence last?” said Kitman.
“I don’t see the tax cut making a difference right now,” said Weinberg. “As far as disposable income for the consumer, how much is going to be actually allocated for clothing?”