NERVOUS EYE ON ECONOMY

Byline: Scott Malone

NEW YORK — With signs of an economic slowdown in the U.S. becoming more prevalent, jeans executives are starting to admit that 2001 isn’t likely to be another banner year like 2000.
The jeans category isn’t typically the first apparel segment to feel the pain of a drop in the economy, they said, for a number of reasons. In most cases, jeans aren’t a big-ticket item, so nervous consumers aren’t going to start rethinking their clothing purchases as quickly as they’d wonder whether to buy a new car or fancy watch, executives contended.
Further, they pointed out, teens remain a major chunk of the jeans-buying population. Right now, the high school and college set is a little more worried about the future of Napster than whether the Dow is north or south of 10,000.
But while market fluctuations and talk of job cuts at major American employers haven’t caused teens to cut back on their apparel buying, the effects of the market gyrations may become more evident for the back-to-school season, executives noted, when more teen apparel purchases are financed by parents.
So far, firms haven’t seen a major drop in ordering activity, though vendors acknowledged that retailers are becoming more conservative in their orders, as they warily watch what effects the economy is having on consumer spending. At the nation’s two leading jeans suppliers, the men at the top acknowledged concerns about the business outlook, but held out hope that smaller-ticket items, like jeans, won’t be all that affected by a slowdown.
“We have to expect a tough economic environment and, as a result, a very competitive and tough retail environment where people are watching their inventories very carefully and not taking huge risks and getting far out on a limb,” said Phil Marineau, president and chief executive officer of San Francisco-based Levi Strauss & Co., which early this week reported an 8 percent slide in first-quarter sales, partly as a result of order cancellations by retailers.
“It may work to the basic apparel business’s favor, though, because as consumers go back to basics like Levi’s and Dockers, they look for good value,” Marineau reasoned. “You see a tendency to walk away from more fashion or higher-priced apparel items out there.”
Similarly, Mackey McDonald, chairman, president and ceo of Greensboro, N.C.-based VF Corp., which produces jeans brands including Lee and Wrangler, said that the uncertain economic outlook has affected consumer spending.
“Overall spending at retail has been impacted negatively,” he said last week in an interview at the New York Stock Exchange, where the company was promoting a tie-in between Wrangler and professional rodeo. “A positive spin is that when people get more selective in their purchases, they tend to gravitate toward brands that are well known and that are perceived as having good value.”
Still, despite their worries, executives said that early spring sell-throughs have been good, as consumers respond to new fashion looks, including flares and belted looks.
“I guess that’s on everyone’s mind,” said Ron Gelfuso, executive vice president at Mavi America Sportswear in New York. “There’s a caution, though business belies that caution in the specialty area right now. Over the last few weeks, it’s shown some good signs of health and vigor.”
Still, he acknowledged, “I don’t think that anyone is anticipating an easy time this year at any level. You are going to have to be very correct in your assortment, very focused in the product you develop overall, and hopefully that will meet the consumers’ needs. Because the appetite is not as great as it was last year.”
Looking ahead, he expressed some nervousness about how sales trends would look during the all-important back-to-school buying season.
“Our order book is pretty strong for back-to-school, but I think the retailers generally are paring down the number of vendors they are carrying,” he said. “It remains to be seen, when we get to back-to-school, how the recession story unfolds.”
Lisa Engelman, the New York-based director of sales for Paris Blues, said that for her company, sales have been picking up, after a slow period late last year when an overreliance on basic goods failed to spark consumer interest.
“We’re just seeing business get healthier right now. I can’t say it’s having an effect right now,” she said, adding that the stock market isn’t really on the radar of the teen girls who are the core customers for her moderate-priced brand.
“We’re in a fashion cycle right now, and it seems to be working. Business is getting healthier. It’s not spectacular, but there are more bright spots.”
Citing frayed waists and belted looks as her brand’s key fashion items, she said that retailers have actually been open to higher-priced goods as they seek out more fashionable items to catch consumers’ eyes.
“I’m actually finding that they are opening themselves up to higher price points to get better fashion items on the floor,” she said.
The value issue is something that vendors are pushing at all price points. Even ABS, which recently upped its denim offerings, selling $200 versions of jeans that it contends cost $800 at the designer level, attests that its consumers see their product as a value, as long as the fashion is right.
“It seems that whenever people get down on the economy, it’s going to hold them back from buying something if it’s not exciting,” said Lloyd Singer, president of the brand. “If you are doing something that is very exciting at a right price…there is no resistance.”
Still, he, too, admitted that retailers’ ordering is becoming more conservative.
“They came off a very poor fourth quarter of last year,” he said. “But now that they’ve eliminated a lot of their high inventories, they’re looking to people that have performed in the first few months of this year. They’re narrowing the number of resources.”