DENIM DISH
VF’s Guarded Outlook
Top executives at VF Corp. offered details on their expectations for the rest of the year on Wednesday, reporting that recent retail results had been worse than they expected and that they expect sales to soften in the months ahead.
However, chairman and chief executive officer Mackey McDonald said that cost-cutting, greater operating efficiencies at new businesses and inventory reduction could allow the Greensboro, N.C.-based company to end the year with a profit improvement of up to 2 percent.
“We certainly would all like to see the consumer spending more at retail+.But we are very well-positioned as a company to take advantage of whatever direction this market takes,” McDonald said in a conference call with analysts, in which he discussed second-quarter earnings.
On Tuesday, VF reported an 8.4 percent drop in income for the quarter and lowered its earnings forecast for the rest of the year, as reported.
“We are looking at an overall contraction at this point in time,” McDonald continued. “Retailers are very conservative on inventory. Current retail conditions are such that sales are likely to be down slightly in the second half from our prior-year levels.”
Despite the overall slowdown in retail spending, the company said it’s been able to keep sales stable by increasing market share.
John Schamberger, chairman of the company’s Jeanswear Coalition, said for the 12 months ended April 30, research showed that VF’s overall market share in the category rose to 31 percent from 29.7 percent in the comparable period a year earlier.
That increase was lead by the Wrangler brand, which rose from 13.8 percent to 14.6 percent of the market at department stores, national chains, family apparel retailers and mass markets — the figures exclude specialty stores, catalog retailers, outlets and wholesale clubs. Rustlers’ share rose from 6.8 percent to 6.9 percent; Lee’s from 5.7 percent to 6 percent, and Riders’ from 3.4 percent to 3.5 percent.
He also said that the company’s jeans assortment would be focused on simple designs in the fall, basic silhouettes spiced up with interesting finishes and fabrics, especially those with stretch properties, which now represent half the company’s junior jeans sales.
Schamberger warned that he expected the back-to-school season to be promotional in light of the current retail climate.
“The retailer out there is trying to bring in the traffic,” he said. “Jeans is a destination category and you will see some heavy competition out there.”
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J.Crew Promotes Jeans and Literacy
J.Crew Group Inc. is counting on its denim- and chino-loving customers to support its back-to-school literacy awareness promotion.
From July 20 to Sept. 3, for every denim or chino item it sells, the New York-based retailer will donate $1 to the nonprofit organization Reading is Fundamental, up to a maximum donation of $100,000.
The tag line, “Jeans Count. Chinos Matter. But reading is fundamental,” will be featured on in-store displays at the company’s 112 U.S. locations, catalogs and jcrew.com.
A spokeswoman for the retailer said the company approached Washington-based Reading is Fundamental because “we decided that we wanted to find a charity that could benefit from the success of the jeans and chinos promotion, in terms of incremental sales.”
She added: “We recognize the importance of reading in people’s lives and how it affects their future and basically wanted to support a charity whose mission our customers can relate to.”
J.Crew also will produce and distribute in its stores for the duration of the campaign a bookmark encouraging its customers to read.
Armani Jeans in the Spotlight
Giorgio Armani turned his attentions to his jeans line last week, holding a runway show of spring-summer 2002 looks in the fashion theater of his Milan headquarters.
The looks included a variety of denim pieces, dyed in a deep-ocean blue or patched and distressed. In a collection designed with the summer heat in mind and offering plenty of bare skin, he included miniskirts and pedal pushers topped with bandeau and off-the-shoulder tops.
Simint, which produces the Armani Jeans line, in the past had held shows at various locations in Modena, Italy, where it is based. According to a spokeswoman, Armani decided it made more sense to have the event at his headquarters, since it’s already set up for fashion shows. The theater, in the building where the designer lives, was also the site of a small fire last week.
Avondale Slips Into the Red
Pinched by rising fuel and raw materials costs and soft demand for its denim fabrics and yarn, textile mill Avondale Inc. recorded a net loss of $527,000 in its third quarter, according to a recent filing with the Securities and Exchange Commission.
That compares with net income of $10.7 million for the year-earlier quarter. Net sales were $203.4 million for the three months ended May 25, down 11 percent.
In the filing, Monroe, Ga.-based Avondale, which is privately owned but releases financial figures because of a bond issue, said retailer efforts to trim inventories in the face of slowing consumer spending and the relative strength of the dollar in comparison with Asian currencies had softened demand for its products.
The company said in the filing that the strong dollar is “exacerbating the already highly competitive market conditions resulting from the imbalance of global supply and demand for textile and apparel products.”
It predicted that trend would also hurt fourth-quarter results.
At its apparel-fabrics division, operating income dropped 65.6 percent, to $8.9 million, on a 9.6 percent slip in sales, to $154.2 million. At the yarn division, operating income fell 29.6 percent, to $1.9 million, despite a 9.1 percent increase in sales, to $52.6 million. For the company’s other operations, which include gray fabric sales and a trucking business, operating income was off 75.9 percent, to $700,000, on a 13.3 percent slide in sales, to $22.9 million.
For the nine months, net income was down 71.7 percent, to $6.2 million, on a 4.2 percent drop in sales, to $594.5 million.