Retail Report
Blacks Retail Report is a free monthly newsletter providing expert information and advice on the current retail market.
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Blacks Retail Report
Luxury Menswear
April 2005
Men's Inside Track
The high end luxury retail market has seen tremendous growth over the past two years and will continue to see lateral to moderate increases in fiscal year 2005. In simple terms, the rich continue to get richer. Their palletes have enjoyed the taste of expensive merchandise and they hunger for more. In the United States, individuals earning more than $100,000 a year make up 5.2% of the total population. This group of consumers has been the driving force for two years running. The immediate question is how long will the cycle last? Our clients are now flowing in their March data and the initial results point towards a soft month. This positive retail cycle is clearly on the back 9.
The first quarter of fiscal year 2005 is already behind us and the results are negative. The DOW is down 3.0% and the S&P is down 2.4% for the year. Compounding the issue is the rising cost of fuel which continues to squeeze wallets at all economic levels. The pressures of rising costs, soft economic markets, and decreasing sales trends lead us to recommend that our clients go into the Fall season "Cautiously Optimistic."
Price Wars - Winners & Losers
As the value of the euro continues to out-pace the dollar, can our stores continue to pass the price increases of luxury goods on to our customers? Eventually our customers will place increased pressure on our margins? At the same time, moderate prices are declining as Chinese quotas expire. How is this going to impact luxury stores? Will low prices from the Far East offer margin opportunities that can offset the margin spill from Europe? As Business owners and merchants, we need to seize the opportunities of global pricing. Always remember that immediate opportunities require Positive Open to Buy. Here is the message: "During Turbulent Times Increase Planned Turnover."
The Power of Turnover
It's critical that stores similar to your operation generate overall turnovers between 2.4 and 2.7. Turnover strategies should be reviewed at the classification level and should be used as a vehicle to improve sales volumes, gross margins, cash flow and overall profitability. Without a clear understanding of these retail concepts, it will be challenging to perform at a higher level.
The China Effect
Chinese exports are booming and will have a direct impact on our future merchandising decisions. The low costs of Chinese production are driving key luxury vendors out of Europe. It won't be long before our colleagues and competitors are selling quality $1,000 Chinese suits. This is a real opportunity to increase our Gross Margins while not passing price increases along to our valued customers.As China embraces capitalism, their ability to meet the demands of production has changed innovative outsourcing forever. Buyers now have the ability to make several purchases a year and even monthly if desired. Previously, buyers may have bought twice a year according to the seasons. In today's working environment, buyers have the ability to leverage risk by chasing product and minimizing excess inventories. This formula has lead to stronger margins, fewer markdowns, healthy turnover and greater cash flow. Independent luxury men's stores are already embracing this opportunity. At the very least, educate yourself on the opportunity and explore resources.