Blacks Retail Report

Luxury Apparel
October 2007

Table of Contents

• The Big Picture
• Not So New
• Time To Grab Share
• Blacks Bottom Line

The Big Picture

The housing slump and subsequent credit crunch continues to weigh on the U.S. economy. The combination of high oil prices and tight lending has led forecasters to trim their growth expectations for the last quarter of the year. Fourth quarter growth is now expected to come in at 1.6%, down from initial estimates of 2.7%.

Despite the downturn, retailers are still expected to make moderate gains this holiday season as long as they focus on fundamentals. Blacks is predicting growth in the low single digits. This forecast is based on an estimated 20% contraction in sales growth, so retailers who have been growing at 5% YTD in 2007 would slow to 4% for the remainder of the year.

Not So New

There’s no newness driving sales right now, which means that retailers will have to work even harder to move product. We’re still seeing a continuation of the Dress and Cashmere trends we mentioned previously but even those hot sellers will be stale by spring.

Dresses have had a good run – they were up 110% in September – but we expect a slowdown in spring. Many of the spring dresses are prints which can’t be worn as frequently as solids or separates. We expect women to turn to more versatile alternatives such as skirts and pants which can easily be recycled through a wardrobe with different tops. We expect the skirt business to pick up in particular since legs are still the 'show' of the season.

Menswear is also suffering from a lack of new trends. The loose construction jacket has fizzled out (or at least it should have) and the knit business is down. T-shirts will still sell but not at a high enough volume to revive overall knit sales. Suits are selling sporadically and spring goods are not bright enough to spark sales based on coloration.

Time To Grab Share

With the market growing at a slower pace this is the time to focus on getting a bigger share of the pie. This means taking someone else’s business by extending into new categories, refurbishing your store, retraining your sales team, launching a new marketing campaign or even opening a new location if it makes financial sense.

Practice good merchandising skills and look for other ways to approach the market. The retailer who gains in this market will do so by gobbling up someone else’s share.

Blacks Bottom Line