NEW YORK — Don’t count out the premium denim market yet, nor the jeans pyramid below it.
Paper Denim & Cloth announced plans in January to reposition the brand at a lower price, reigniting debate over the future of the premium denim market. As the first quarter of the year nears an end, signs of a shakeout of the crowded premium denim market have yet to appear and several brands are doing more than just surviving.
“While we have seen a disconnect between fashion and reality in terms of color, we have also seen the pundits who have called for the death of premium denim so far proven wrong in 2006,” Eric Beder, a retail analyst with Brean Murray Carret & Co., said in a research report issued Monday after a mall tour. “We have seen no slowdown in denim, just a shift to less aggressive washes and tearing.”
Doomsday predictions about the denim market reached a peak during the back-to-school season. Beginning in May, retail analysts noted retailers were placing huge denim orders in anticipation of the fall season. Some of those retailers, Express in particular, had missed considerable sales by not stocking enough denim the previous year and seemed to be moving to the other extreme.
As the months passed, the words “denim glut” appeared with increasing frequency in analysts’ research reports and comparable-store sales previews. Most analysts believed the first signs of weakness in the denim market would naturally occur at its highest end.
However, denim proved to be a top seller for the b-t-s season and the rumblings of a glut faded. Even so, denim industry executives acknowledged that the constant flow of premium players entering the market would increase pressure on the segment and had created some confusion among stores and consumers. Then Paper Denim’s move led some to believe that the fallout was beginning.
“Within a year and a half, the premium denim market will implode,” said Chris Gilbert, president of Paper Denim, when he announced the brand’s repositioning.
Gilbert said he had seen a slowdown in the premium market on a national and international scale during the preceding six to eight months.
The numbers have yet to back this up. Denim sales reached $15.26 billion for the 12 months through January, a 9.3 percent improvement over the $13.97 billion reported in the previous 12-month period and 17.7 percent better than the $12.97 billion in 2004, according to NPD Group, a Port Washington, N.Y., research firm.
Although jeans priced between $20 and $39.99 represented the largest segment of the market, with sales of $6.37 billion, higher-priced jeans posted the largest growth. NPD said jeans at $60 and above generated sales of $1.05 billion for the 12 months through January, or a 6.9 percent market share. During the same 12-month period a year ago, jeans priced above $60 generated sales of $761.4 million, or 5.4 percent of the denim market.
True Religion Apparel is moving quickly to use its denim offerings as the basis for developing itself into a lifestyle brand. A focus on expanding its product array and developing global business has paid off. On March 15, the Los Angeles company reported earnings of $19.5 million for 2005, a gain of 361.4 percent. Sales for the year ballooned 270.7 percent, to $102.5 million from $27.7 million.
“This was driven by strong sales of our core denim line in men’s and women’s, and an increasing component of nondenim sportswear,” Jeff Lubell, president and chief executive officer, said during the company’s conference call. “We have an opportunity to build an incredible premium sportswear business on the back of our premium denim business.”
The firm opened its first freestanding store this year, which Lubell said had sales of more than $500,000 in its first three months.
Premium’s persistence appears buoyed by continued strength in the broader denim market. Recent walk-throughs conducted by retail analysts showed denim to be a key category at retail. Citigroup retail analyst Kimberly Greenberger was the host of a mall walk on March 17 at Garden State Plaza in Paramus, N.J. Greenberger brought along merchandising expert Paula Ullmann, who identified denim as a primary spring fashion trend.
“Denim continues to drive volume, despite a lack of new directional trend, and is performing above expectations,” Greenberger said in a report. “The popularity of the denim short has been particularly surprising.”
Analyst Beder said in his report that growth isn’t limited to specialty retailers like American Eagle, Abercrombie & Fitch and Express. He pointed to True Religion, Antik and Taverniti as prime examples of premium brands that are thriving.
“For True Religion, we believe the brand has continued to take market share at both Nordstrom and Bloomingdale’s,” Beder wrote. “At Nordstrom, the level of women’s offerings is beginning to rival Seven for primacy.”
The biggest inroads at department stores have come from Antik and Taverniti, both manufactured by Blue Holdings.
“From virtually no offerings last year, we have already seen reorder for the lower-priced Antik line at both Nordstrom and Bloomingdale’s in the first month of sales,” Beder’s report noted. At Bloomingdale’s, Beder said he found more than 30 pairs of Taverniti jeans, “equivalent almost to True Religion and larger than Diesel.”
Brian Hogan, president of Modamood, New York, Replay’s wholesale distributor, said price points have held and demand for Replay’s high-end line, We Are Replay, has grown.
“It’s the last part of the collection that gets shipped, but it’s the first that retails once it hits stores,” Hogan said.
He agreed that premium denim would reach a tipping point where newcomers are swept out of the market. Brands like Seven, True Religion, and Diesel will be able to react and make it through down times, he said, noting that larger premium brands are innovating their styles.
“You’re going to see lateral moves from brands,” Hogan said. “You’re going to see Replay, True Religion and Seven really clean things up and become a little more tailored.”
Steve Opperman, founder of Iron Army Clothing, said the state of the premium market is a constant subject of conversation. Opperman views the rising competition as a positive, even for smaller brands such as Iron Army.
“It forces me and my partner to think,” Opperman said. “It’s making more people think before they put something out. I think it makes people improve their product and I’m excited about it, even if there’s a lot more brands.”
Opperman also values the flexibility that being a smaller operation affords him.
“We can be really responsive,” he added. “I’m not sitting on top of tons of inventory, so we can turn on a dime.”