VF Sees Strong Jeans Quarter
Coming off of a strong first half for the jeans business, VF Corp. expects denim to remain an important growth engine in the third quarter.
In a Wednesday conference call with analysts, held the day after the company reported a 1.5 percent increase in second-quarter earnings, executives of the Greensboro, N.C.-based company sketched out their outlook for the rest of the year.
“Lee continues to do better than we anticipated, and we’re expecting a solid second half for Lee,” said chairman, president and chief executive officer Mackey McDonald. He also noted that the company’s European jeans business has shown “markedly better” profitability in the first half of 2000, compared with the same period a year ago.
Executives noted that VF’s overall jeans sales were flat for the second quarter, but attributed that to the movement of some orders that traditionally were placed in the second quarter into the third. That marks the second year the company has observed that trend.
Despite flat sales, the company said overall jeans earnings were up, partly as a result of a change in Lee’s sales mix. Last year, the brand had been selling large amounts of clearance merchandise in the first half. First-quality jeans sales were actually up in the first half of 2000, executives said.
John Schamberger, chairman of the company’s jeanswear coalition, said the company is expecting a very strong second half for jeans.
“The jeanswear forecast is close to double-digit [sales increases] for the third quarter, across the board,” he said. “Lee has one of their largest third quarters that I can remember coming up.”
Schamberger also addressed the recent rise in denim prices. Most top U.S. denim mills have sought to hike their prices on third-quarter shipments.
“We’ve seen a little bit of an increase in the third quarter from some of our mills. But we have purchased the majority of our denim through the rest of the year,” he said. Overall, he said, the average price the company is paying for denim is up 1 to 1.5 percent.
“We hope, going forward, that would basically remain about the same as it is today,” he said. “We have other mills to go to, both here, in Mexico, South America and Asia, to try to keep our prices as low as possible.”
After making four major acquisitions this year, including the Chic and Gitano brands, VF as a whole is inclined to stop and digest for awhile, McDonald said.
“Right now we have a number [of recently acquired companies] on our plate that we are integrating. So we are not currently looking for any small acquisition to add to the number we have now,” he said. “We still continue to look at significant opportunities to strategically position ourselves and grow for the future. We’re continuing to look at opportunities. Sometimes you can’t make the decision about when these things will occur.”
McDonald also acknowledged that the company is concerned about the recent slowdown in retail activity but hasn’t been directly affected as of yet.
“We have not seen any significant change in our order positions for fall and holiday business,” he said. “But we are seeing some softness in the actual performance numbers coming out of retail, which always creates some concern on the retailers’ part.”
Target’s Fashion Flash
“We are on a mission to democratize style and fashion,” announced John Remington, Target’s vice president of public events, at the mass merchant’s fall fashion show, held here last week at the Chelsea Piers.
Toward that end, Target acted like any major retailer facing a challenging fall fashion season and picked out six key trends it thinks will get customers interested in buying apparel.
Hint: the return to luxury was not one of them. Denim jackets, however, made the cut.
In addition, Target focused on bright colors like yellow, fuchsia, electric blue and orange; quilted vests; leather separates; cotton-nylon utility looks; embellishments and animal prints. And the store mounted a runway show — the models circled a giant red bull’s-eye target, the store’s emblem — that featured its fall offerings for men and women.
Those included stylish black leather pants and jackets, quilted jackets with coordinating turtlenecks worn over denim skirts or cropped jeans, handkerchief-print skirts with tie-dye T-shirts, Western-print shirts paired with cowboy hats and jeans, and cargo pants and skirts paired with knit tops or fleece vests.
Target has also made a splash with its Pop Art-inspired ad campaign, and to play off that, it commissioned nine artists to create installations inspired by consumer culture. Each piece used products featured in the fall ad campaign, including Jolly Rancher candies, Cheer detergent and Suave hair care. During a cocktail party before the show, guests milled around the Piers’ terrace, checking out the artwork and watching the sunset over the Hudson.
Fossil Jeans Hit the Web
Demonstrating its faith in cybershopping, Fossil on Wednesday debuted its first collection of jeans and related apparel exclusively on its Web site at fossil.com.
“Premiering this collection on the Web seemed a natural fit,” said Kurt Hagen, vice president of e-commerce. “Our target customer is a 16- to 24-year-old man or woman. Most of this group is already comfortable with, and enthusiastic about, online shopping.”
He also said that Fossil is committed to “the highest level of customer service” to ensure that orders are quickly fulfilled.
As reported, the Richardson, Texas-based company also plans to roll out at least 12 stores this summer and fall, including a flagship store in Manhattan’s SoHo district, each of which will feature the new product lines. The stores will be larger than the existing 17 units; 70 percent of their assortment will be apparel and the balance accessories.
Prices for Fossil clothing start at about $12 for T-shirts to about $39.50 for jeans; leather jackets carry prices of about $250. Product offerings include V-neck sweaters, tank tops, novelty T-shirts, sweatshirts, outerwear, denim and cotton pants.
Richard Gundy, executive vice president in charge of merchandising, has described the casual apparel and jeanswear line as “equivalent to Abercrombie & Fitch, but more modern, like Banana Republic.”
“Our latest line of jeans and apparel is a natural extension of the Fossil,” Gundy said. “The talented team of young designers in our studio have designed clothing that our customer will love to wear and which captures the style, sense of humor, value and quality that are the essence of the brand.”
The company’s watches start at $55, and leather goods carry opening price points of about $20. Fossil also produces belts, handbags, and sunglasses.
Lucky’s Car Sweepstakes
In another e-commerce move, Lucky Brand Dungarees is giving away a car on its Web site in an effort to build traffic.
Customers who visit the site before July 31 will have a chance to win a $20,000 customized, limited-edition PT Cruiser. To enter, they must fill out an online registration form.
A winner will be chosen at random after the promotion ends.
As reported, Lucky, which is majority owned by Liz Claiborne Inc., plans to spend $20 million on marketing initiatives this year, $8 million of which will be in advertising.