REGROUPING AFTER THE STORM
Byline: Karyn Monget
NEW YORK — While intimate apparel has often been insulated from economic downturns, it’s taken some hits during this year’s soft retail environment.
Foremost among the troubles was the Chapter 11 filing last month of one of the industry’s key players — The Warnaco Group — with its cadre of major licensed and proprietary labels. The company is said to be considering a range of options in the reorganization process.
Several firms have closed factories and laid off workers and more restructuring is expected. Small and midsize companies are focusing more on product innovation, quality control and timely deliveries, which they hope will deflect a continuing barrage of chargebacks. Some said a retrenching of resources could occur, which would likely benefit innerwear giants such as VF Corp and Sara Lee Corp.
The first half has been particularly tough for traditional foundations makers, especially those in the commodity end of the segment, where price competition and intense promotional activity have become a way of life.
It’s more of a mixed bag when it comes to sleepwear, robes and daywear. Sales of upscale merchandise — goods that retail in excess of $300 — have struggled at major department and specialty units, stores have reported, while moderate- to better-priced goods are expected to continue fueling sales at department stores and national chains.
Charles Nesbit, president and chief executive officer of Sara Lee Intimate Apparel, said: “The first half was disappointing from a shipments-volume perspective. The business was relatively flat, overall. Mass businesses generally experienced growth, while department-store business experienced some volume decline, suggesting consumers in the marketplace for bras were seeking value.
“I’m sure our department-store business was, to some degree, negatively impacted by the decision to exit Ralph Lauren [intimates] and the aggressive [product] liquidation efforts of Warnaco. In addition, retailers in all classes of trade were pulling inventories down, which in turn affected manufacturer volume.”
Nesbit said pricing of product is important in today’s environment. The business is in a deflationary cycle, he said, so Sara Lee is carefully analyzing price points and the pace of sales that can be expected at various price points.
“An ongoing process of internal cost reduction is essential to being able to price smartly and provide the marketing and promotional support needed to move product when the consumer is managing her pocketbook tightly,” said Nesbit. “This, to a large degree, explains the employee cutbacks many firms in the industry have announced over the past six months.”
Sizing up the second-half outlook, Nesbit said: “Inventory management at the manufacturer and retailer level is going to be one of the most significant issues of the year. With lean inventories in stores and in manufacturer warehouses as well as the downsizing in production capacity at the manufacturer level, when the recovery comes, it is going to be difficult to supply demand for six to 12 months.”
Richard Murray, president of Wacoal America, the U.S. unit of Wacoal Japan, said: “Our total sales corporately are up 6 to 7 percent, and the third quarter looks good so far. Wacoal is my shining star. We are about 5 percent over plan and over 15 percent over last year.”
Murray attributed the sales gains to a Body Suede Ultra group of microfiber bras, the Fit For the Cure campaign to promote breast cancer awareness and shapers, which he called the fastest-growing line of business.
“For the second half, we have lots of in-store fit events planned and two new bra styles for the Fit for the Cure promotion,” he said.
Regarding the outlook for Wacoal’s licensed Donna Karan Intimates collection, Murray said: “The first half was flat and we are projecting down 10 percent for the year. Here, we were affected by the economy and high-end sleepwear has not been performing well since October.
“The key stores that support that business have struggled quite a bit and don’t have the appetite for more. But DKI foundations is holding its own. DKNY Underwear did pretty well in the first half — up about 7 percent over plan and around 14 percent over last year.
Murray said the biggest challenge will be retailers leaning toward conservative buys and inventory positions.
Maurice Reznik, president of Maidenform Worldwide, said he believes sluggish business at retail can be attributed to a lack of new product across the board, continued reliance on promotional activity, increased cross-shopping between channels of distribution, which has eroded department-store share, and real-estate allocation.
Reznik said Maidenform shipments are up 10 percent versus last year, charged largely by the double-digit growth of Flexees [shapers] and Lilyette [full-figure bras].
“Continued consolidation is a double-edged sword for Maidenform,” he said. “The vibrancy of the [bra] category has been negatively impacted, yet for an aggressive company like ours, it represents an opportunity for market share growth.”
Michael Fitzgerald, president and ceo of Delta USA, said: “The fist half was flat, and based on [third- and fourth-quarter] bookings, we are looking at a 5 to 6 percent increase in our women’s underwear business.”
Fitzgerald said that in a soft period, the key issue is whether the consumer is stimulated by the fashion classification.
“You manage your resources in a down market so you are prepared for an upturn,” he said. “I don’t anticipate this upturn, though, until the first quarter of 2002.”
Regarding more consolidation, Fitzgerald said: “It’s not going to improve productivity. But it could possibly give manufacturers more leverage with major retailers.”
Niki Sachs, president and ceo of Hanro USA, said: “The first half for Hanro shows us slightly ahead of last year. We expect a strong finish for the third and fourth quarter, as our fashion bookings in both ladies’ and men’s underwear, and nightwear, are ahead for a combined 20 percent. Basics in ladies and men’s are flat to last year, demonstrating the weakest in demand in the luxury channel of retailing. This is unusual, as basics are usually still strong in a weak economy.”
Sachs said a key issue in the second half will be how aggressive retailers will be in driving traffic to their doors.
Howard Radziminsky, senior vice president of sales at Movie Star Inc., said for his firm, “the biggest issue was losing some key accounts — Wards, Bradlees — and the implications that has on volume and inventory. Also, moving production to new countries while maintaining quality, delivery and budgeting sales and inventory in a soft environment.”
The company’s key priorities for the second half, Radziminsky said, will be “continuing to stay on top of newness and awareness of consumers’ desires, continuing to grow our sourcing capabilities, the issue of price, of which the consumer sets the price that will pay, and staying in stock on key items.”
Carole Hochman, president and director of design at Carole Hochman Designs, said the biggest second-half hurdle will be to “have a fabulous collection.”
“It represents profitability, not just for us, but for our customers,” Hochman said. “Everybody has to be accountable for the stage of retail.”
Lisa Leigh, director of merchandising and sales at August Silk Intimates, said: “Despite the soft retail climate, the customer is still responding well to silk. Key items are solid chemises and PJs and robes in classic colors. Fashion prints also turned well at retail in soft, feminine florals.”