Jeans, particularly in the premium zone, were among the most buoyant categories of apparel throughout the recession and its prolonged aftermath. Their performance during the slow recovery has been less than inspiring.
This story first appeared in the May 14, 2014 issue of WWD. Subscribe Today.
On the positive side, unit sales of women’s jeans in the U.S. picked up in the 12 months through March, rising 1.2 percent to 332.1 million, according to the most recent figures available from The NPD Group, the Port Washington, N.Y.-based consumer-research firm. But the unit numbers weren’t sufficient to lift retailers’ dollar take during a 12-month period that included challenging back-to-school, holiday and early spring seasons. Sales fell 5.2 percent to $8.34 billion from $8.8 billion in the comparable year ending in March 2013, lowering the average price per pair by 6.4 percent to $25.11 from $26.83.
As has been the case for more than a year, higher-priced jeans suffered the most, according to NPD data, with sales of jeans priced at $75 and up dropping 32.5 percent to $665.2 million. The higher end of the market saw its share of sales drop to 8 percent during the most recent 12 months from 11.2 percent in the prior-year 12-month period.
NPD doesn’t break down sales distribution at higher price levels, but Marshal Cohen, chief industry analyst for the firm, said the trends weren’t encouraging.
“The higher you go on price, the deeper the decline,” he told WWD. “Women are simply buying other things. Is a woman these days going to spend $300 on a pair of jeans or a handbag? Perhaps the growth rate for handbags isn’t as high as it had been, but as a category it’s still growing. That’s just not the case with premium denim.”
The realities behind the numbers were easy to spot:
• Jeans were among the most promotional apparel categories in a consistently — and at times volatile — promotional retail environment, especially in the hard-hit teen sector that never regained traction after b-t-s.
• Yoga pants: The broader ath-leisure category and alternative bottoms grew in popularity and became acceptable as a cleaned-up approach to casual dressing, just as premium jeans had earlier.
• Fast-fashion retailers and specialty chains emulating them lowered the baseline for pricing of fashion jeans.
• With department stores cutting back on their buying, often faster than wholesalers could reduce production, off-pricers built their stocks of fashion jeans and were rewarded with increases in market share.
• With lots of jeans in women’s closets and no compelling trend to spur sales, as color had in 2012, the durability of jeans, so often a selling point, became a disincentive for purchasing.
NPD data also shows declines in what are now considered the middle tier of jeans pricing, with sales of jeans in the $50 to $74.99 stratum down 4 percent to $1.17 billion, and those in the $25 to $49.99 group off 4.4 percent to $3.34 billion, making that the largest price bracket by sales volume.
Sales of jeans under $25 were up 2 percent to $3.16 billion, as the lower prices offered in discounts by specialty retailers and those typically offered by discounters and off-price stores lifted that grouping.
On a dollar basis, only warehouse clubs, the smallest dollar generator among those studied by NPD, increased their jeans top lines, growing 9.6 percent, but only to $122.5 million. The smallest decline among the other distribution channels covered was from the broad “other” category, expanded in the most recent study to include off-price retailers. That group’s sales declined 3.5 percent to $1.65 billion, allowing it to lift its share of the overall women’s jeans market to 19.8 percent from about 19.5 percent in the period ending March 2013.
However, that figure allowed the broad “other” category to take second place among the six distribution channels covered, finishing only behind specialty stores, the market share of which was essentially flat at 40.8 percent despite a 5 percent decline in sales to $3.41 billion. Department stores were third, with share down to 16.7 percent from 17 percent and sales off 6.7 percent to $1.4 billion. National chains’ sales fell at the same 6.7 percent pace to $990.8 million and share dropped to 11.9 percent from 12.1 percent. Mass merchants’ share also descended 0.2 points to 9.2 percent, while sales dropped to $769.5 million, a 7.4 percent decline that ranked as the steepest among the channels studied.
Sales of men’s jeans dropped less — down 4.1 percent to $5.43 billion — with units off 3.3 percent to 206.9 million, and average price pulling back 0.9 percent to $26.23, $1.12 more than the average price for a pair of women’s jeans.
“When you have a long run of something like eight years of very good numbers and then the pendulum swings the other way, it’s going to take a while to swing back,” Cohen commented. “When women are wearing leggings and activewear — and all the numbers lately indicate that they are — it’s going to have an impact.”
Susan Anderson, vice president and analyst at FBR Capital Markets, noted that, in addition to the emergence of “soft pants and more fashionable activewear” being worn for non-active pursuits, “we had a very strong dress trend up until the middle of last year, which has continued to a lesser extent. With more high-waisted bottoms being sold, there’s a bit of a change in tops, too.”
Where Anderson sees signs of promise is in the simple playing out of the cycle.
“Some retailers are saying that denim is OK now, but what we’re looking at are comparisons with the period when the color trend in denim was essentially ending or over,” she said. “The declines at the moment aren’t all that huge, even though specialty chains — Hollister, American Eagle, Gap — are all being extremely sharp on price.”
Some of the declines at the high end of the market have been mitigated by premium denim brands staking their own claims as retailers and, whether with or without a retail presence, expanding into Europe, Asia and other markets.
“There were tough economic conditions in Europe, but the European consumer is accustomed to more of a designer approach and there’s been less pressure,” she said. She noted that recent acquisitions of partial or total stakes in premium denim firms by private equity interests — including True Religion Apparel Co., NYDJ, Lucky Brand and, by competitor Joe’s Jeans, Hudson Jeans — could serve as an incentive for innovation and foster new merchandising and marketing approaches to what has to some become a fairly predictable business.
Andreas Kurz, who advises denim and other fashion companies through his firm Akari Enterprises, said that denim companies have offered lots of innovation in recent seasons, but the impact hasn’t been sufficient to compensate for the loss of business in areas like colored denim.
“My advice to firms fighting the funk in higher-end denim is to look to international markets, but companies that did that got burned when the EU tacked on a tariff hike for jeans made in the U.S., which really hurt companies in Los Angeles,” he said, noting that those tariffs are now back to their previous levels.
With the air thinner at the top of the market, he also advised premium brands that want to survive the current pressures to develop a full collection, as opposed to simply adding “a few T-shirts and other tops. It’s one of the hardest exercises in fashion — to move from denim to an actual collection — and it means you can’t do it all from L.A. The one thing you don’t want to do and can’t do in a market like this is trade down.”
Cohen expects U.S.-based premium denim firms to continue to mitigate erosion in their domestic businesses by going more global and resorting more to direct-to-consumer opportunities in stores and online.
“There’s a valuable lesson here,” he said. “A lot of premium companies rode the color wave and caught up in their own success, but it wound up being short term. I’ll tell anyone who’ll listen — they have to wake up and they have to innovate. It doesn’t mean the first thing they try is going to succeed, but they have to have something besides a recycled version of what they did last time.”