This story first appeared in the June 5, 2002 issue of WWD. Subscribe Today.

The good news is the economy rebounded during the first quarter of 2002. The bad news is that economists think it may level off or slow down again.

Measured as gross domestic product, the economy grew at an annualized rate of 5.8 percent during the first quarter of 2002. Consumer spending grew 3.5 percent rate, largely due to a 10.1 percent growth in personal disposable income. But much of the income growth came from the federal government, as tax cuts or unemployment compensation.

Widespread job creation is not occurring quite yet, as layoffs and plant closings continue. Donald Ratajczack, chief executive officer of Brainworks Ventures, an Atlanta consulting firm, said, “The economy’s building, but not enough to raise the confidence level of employers who were clobbered last year in profitability.”

The uncertain economy, combined with reports of more layoffs and store closings, should keep consumers in a cautious mood, said Candace Corlett, partner at WSL, a New York-based strategic retail consulting firm. The recession, said Corlett, is just now starting to sink in with consumers.

“It’s been called a business-to-business recession, but it’s just now starting to trickle down,” she said. “Companies are watching profit margins and looking to cut costs, through technology, which will result in more layoffs.”

Another factor for consumers, especially in apparel, said Corlett, is sheer boredom. With the exception of a few — Liz Claiborne, Donna Karan, Eileen Fisher — manufacturers are not offering product that excites consumers to buy on impulse. Corlett said retailers and manufacturers have overlooked many opportunities for growth, even in these times. Women over 50, a group that spends $58 million annually, according to the American Association of Retired Persons, are an underserved market, said Corlett. Another category, “career-smart dressing,” offers potential in the current transition from business casual back to more put-together workwear.

Companies, such as Chico’s, that address older women with fashion-forward looks and a more forgiving fit, are doing well. Chico’s stood out in April with a comp-store gain of 16.8 percent, a number consistent with the chain’s performance throughout the past two years.

Manufacturers are making adjustments to the recession, both by reaching out to new markets and by increasing efficiency through cost-cutting measures.

After a disappointing 2001, Lafayette 148, a New York bridge sportswear resource, expanded into large sizes and eveningwear for fall 2002 distribution. The vertical manufacturer also focused on reacting quickly to market conditions, cleaning out inventory by February, and focusing on reorder business by March.

Sales began to pick up in March for the five-year-old company, according to president Deirdre Quinn. In the future, with consumers still cautious, Lafayette 148 will continue its focus on quick response — cutting orders close to sales, reacting quickly to trends and offering specialty stores unique merchandise to inspire consumers to buy.

“The challenge is to do better,” he said. “There’s a big market out there, with opportunity, but more than ever, you have to work hard to please, to find a niche.”

For New York social occasion manufacturer Victoria Royal Ltd., the four months after Sept. 11 were a difficult time. But since the first of the year, business has picked up, with year-to-date sales up 12 to 15 percent over last year. Based on strong fall orders, president and ceo Alan Sealove predicts a strong second half.

“People will always have parties and weddings,” he said, adding that buyers have returned to New York to shop as well as regional markets.

Lou Breuning, president of New York sportswear manufacturer August Silk, described business as “still challenged.”

“It’s not the economy or stock market so much now, but the fact that consumers need a reason to buy,” he said. “We need to react faster with more assortment and novelty, in texture, yarns and treatments.”

The company is restrategizing its stock position, said Breuning, slightly decreasing core offerings of 12-gauge layering pieces, and adding more novel looks, such as spun-silk shirts with detachable white collar and cuffs.

At NYFO, a Norfolk, Va.-based better-to-bridge specialty store with a second location in Richmond, Va., spring sales increased 3 to 3.5 percent over last year. After a slow start, April and May sales were strong.

Business fluctuates with the number of ships in the Navy town of Norfolk, a market of around two million people, where recent military buildups have helped the local economy, said owner Shel Isenberg.

Isenberg said summer should have similar sales increases. “We’ll be in transition at the proper time and able to offer something new and different,” he said.

Direct mail pieces are aggressively sent out roughly every three weeks, and newspaper inserts target local markets.

At Cameron Clothing, a Raleigh, N.C., better specialty store, spring sales were around even with last year, after a poor fall, said owner Marshall Lamb. “Summer’s not [a season] we particularly plug; most fall merchandise is on the floor by mid-July,” said Lamb.

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