SHAPING FOR A BETTER PLAN
Byline: Kristin Larson
NEW YORK — They held their own in a difficult environment in the first half, but better sportswear firms know they face inventory concerns, sales challenges and profitability problems in the third and fourth quarters.
Vendors are carefully weighing in-stock positions — too much inventory versus reorder capability — working closely with their retail partners on fall and holiday buys and presentations, while developing fresh styling with an eye on novelty to entice consumers.
In the better zone, Jones Apparel Group and Liz Claiborne Inc. continue to hold a dominant position, controlling a healthy chunk of real estate in department and specialty stores. Both company’s have been on the acquisition trail the last few years, amassing a roster of name brands to augment their signature labels within and outside the core category.
In April, Jones’ brand portfolio was given yet another boost when it paid $572 million for McNaughton Apparel Group, a major player in the moderate market. A month later, Liz Claiborne acquired 100 percent of the stock of Mexx Group BV, the Netherlands-based retailer and wholesaler of casual apparel and accessories with a strong European and South American presence.
In addition to Jones New York, Jones Apparel Group’s repertoire of better brands includes Nine West, Rena Rowan and the licensed Lauren by Ralph Lauren. In the first quarter ended April 7, Jones reported income of $96 million compared with earnings of $71 million in the prior year.
A 12 percent reduction in its selling, general and administrative expenses to $250 million, from $285 million in the year-ago quarter, enhanced the bottom line. Although sales dipped 1.1 percent to $1.07 billion from $1.08 billion, those for continuing businesses rose 9 percent.
When the results were announced in May, chairman Sidney Kimmel said: “We are extremely pleased with our excellent results, especially given the overall uncertainty prevailing in the current economic environment.”
At Liz Claiborne, income dropped slightly to $45.5 million for the first quarter ended March 31 from $46.5 million in the comparable period. Sales were up 2.1 percent to $826.7 million. Paul R. Charron, chairman and chief executive officer, told Wall Street analysts in a conference call when the results were announced in April that he was “pleased with the results” considering the economic conditions.
“This has been a difficult environment in which to operate,” the ceo said. “The macroeconomic context in which retail selling has taken place has been generally inhospitable.”
Liz Claiborne’s brands now range from bridge and better to contemporary and moderate, including Dana Buchman, Sigrid Olsen, Laundry by Shelli Segal and Lucky Brand Dungarees, along with licensed lines from DKNY and Kenneth Cole. The company’s sales for the year were up 10.6 percent, to $3.1 billion.
Ann Caruso, director of retail development at The Doneger Group buying office and retail consultancy, said retailers are heading into the crucial second half with tighter stock level positions than a year ago to lower their risks.
“They also want to buy closer to the season to feel out the market,” Caruso said. “So if things start to open up, they’ll have the money to come into the market and spend.”
Cautious measures like these are necessary in an uncertain economic climate, noted Caruso, adding that retailers will most surely up the ante with in-store promotional events, while “crossing their t’s and dotting their i’s in terms of customer service” in attempts to attract business.
While business appears to continue to run on a challenging track, Caruso said a good sign is that early fall goods reaching speciality stores have performed well.
“The better customer is responding to knits and seasonless suiting for career dressing,” she said.
At Jones, retail development is a major area of focus for the third and fourth quarters, said Jackwyn Nemerov, president.
“We believe in our customer and we’re working diligently with the stores on retail development,” Nemerov said. “Whether it’s something as simple as getting a customer a different size, it’s an important strategy for us — being very hands-on with the customer.”
Nemerov said Jones employs more than 200 retail coordinators who work with the stores on a range of issues.
At Liz Claiborne, sweaters will play a major role in the fourth quarter, with the emphasis on novelty looks in solids, stripes or embellished styles, said Angela Ahrendts, vice president of merchandising.
“We’re in a classic, novelty cycle now and a strong feminine cycle,” Ahrendts said. “If you look at Gucci’s new runway show or Prada’s, it’s the lace and the eyelet, and the Liz brand is all about classic and feminine.”
Drama, a career and evening separates-driven line aimed at speciality stores, reported a 30 percent increase in business over the last six months.
“Spring was good because we had a different strategy,” said David Merk, designer for Drama. “We tried to offer a lot of items in prints and solid microfibers and it really worked,” resulting in strong reorders.
However, fall bookings have been more difficult, said Merk, adding that he’s seen bigger orders from fewer stores.
“But the good thing for us is, because we’re an item resource, we can tell [stores] these are the two or three or four hot items and all of a sudden, we can get a few hundred pieces over the phone,” Merk said. “But people are buying much closer to need, which is a sign of the times.”
While orders may be coming in later, August Silk president Lou Breuning said companies should be in a position to fulfill stock when it is needed, even if that means a three or four day turnaround time.
“You don’t want to be carrying ridiculous amounts of inventory, but it’ll be a controlled gamble, if there’s such a thing as that,” said Breuning, who projected a 6 percent increase in sales this year, compared to recent annual gains in the 16-to-17 percent range.
In addition to intensifying stock, Breuning said August Silk will unveil a new advertising campaign come spring and has plans to use a greater variety of yarns to attract a wider audience.
White & Warren partner Barbara Benenson has taken the tack with retailers of recommending that they not overload on too much merchandise.
“We don’t want to sink them with our merchandise when times are tough,” Benenson said. “We’ll say, ‘Don’t buy too much. Be clean.’ And if they buy too much, it could be a liability and they don’t want it and we don’t want it.”
Despite the economic concerns, Benenson said she’s optimistic for fall and holiday, citing “really good bookings” on a new category of merino wool sweaters, coats and jackets with leather trim the firm has introduced.
“Out of a box, we booked thousands of units,” she said.