Blacks Retail Report

Luxury Apparel
December 2005

Table of Contents

The Big Picture
Insight Analysis
The Fall Ahead
Blacks Bottom Line
TrendLines Expert Data

The Big Picture

Merchants start your registers - the Christmas shopping season has officially begun. Black Friday saw crowds of shoppers brawling over the latest gifts, but this activity was driven by deep discounts from mass-market retailers. That sort of shopping frenzy does not necessarily reflect consumer demand in the luxury market.

For high-end merchants who avoid door-busting discounts the picture is less clear. Inflated energy costs, interest rates rises and recent natural disasters have had a definite psychological impact on consumers. Although high-end shoppers usually have enough disposable income to weather the storm, the real question is how much of that income they are willing to spend in this hazy economic environment.

According to the Conference Board, economic activity crept up 0.1% in October, although housing starts and stock prices fell. Meanwhile consumer confidence remained steady.

Given that luxury shoppers are generally more affected by factors such as real estate and stocks than heat costs, Blacks is holding to somewhat cautious holiday sales forecasts, but we are still expecting year-on-year growth.

The most recent Commerce Department figures show 4.3% growth from July to September of this year, up from the department's initial 3.8% estimate, and identical to the growth posted in the same period of last year.

Insight Analysis

As we discussed last month, we are currently experiencing a 'trough' period in the positive retail cycle. Troughs are characterized by spotty or stagnant sales activity, but they do not necessarily bring declines. During troughs in particular it's imperative for merchants to regularly monitor and adjust their spending, inventory and margins to optimize performance.

Perform Insight Analysis by taking stock of all the factors affecting your business. You need a 360-degree view if you want to achieve growth during this period.

And given that this trough is occurring over the important holiday sales season, Blacks recommends that merchants further reduce the time between business evaluations. Begin doing 60-day trend analysis rather than a 90-day analysis. Monitor how fast you're transacting so you can adjust buying plans. This will increase your agility when it comes to responding to the current environment.

But first and foremost, make shat your evaluation systems and procedures are well in place. Your success during this period will greatly depend on your ability to measure performance and make necessary adjustments. And don't forget that the season doesn't end on December 25, but at the end of the first markdown cycle.

The Fall Ahead

This fall is already in the bag, but next fall is just being revealed. By the time you read this report, the early European men showroom presentations will have begun. Color palettes are already set but merchants should note the missed demand for lighter colored goods this season. Although the mantra this fall was 'black is back', not everyone was prepared for such a serious look.

At Blacks we are anticipating demand for stronger contrasts in the fall '06 assortments.

You can keep abreast of the latest in fashion news and trends in the In Fashion section of this site.

Blacks Bottom Line

Use tighter Insight Analysis to place product at a greater or accelerated rate.

TrendLines Expert Data - Menswear

All data represents 2005 year-over-year data

Clothing	October Sales	90 Day Sales	90 Day Avg. Inventory	90 Day Avg. Markdown
Suits	- 7.6%	- 6.0%	26.9%	- 15.1%
Sportscoats	- 5.9%	2.0%	20.8%	- 27.8%
Blazers	- 14.3%	1.1%	- 16.9%	6.4%
Dress Pants	12.1%	2.1%	15.2%	- 0.9%
Custom Clothing	29.6%	20.5%	N/A	N/A

Furnishings	October Sales	90 Day Sales	90 Day Avg. Inventory	90 Day Avg. Markdown
Dress Shirts	- 0.3%	- 2.3%	- 13.1%	- 10.5%
Neckwear	1.8%	- 0.1%	23.2%	16.7%

Sportswear	October Sales	90 Day Sales	90 Day Avg. Inventory	90 Day Avg. Markdown
Sportshirts	- 2.0%	- 2.7%	22.9%	9.7%
Knits	- 15.3%	- 6.0%	2.1%	- 38.1%
Sweaters	6.3%	6.2%	14.7%	- 13.9%
Casual Pants	- 15.7%	- 15.4%	- 6.1%	- 20.2%
Jeans	0.3%	- 13.4%	59.8%	- 38.4%
Outerwear	- 11.3%	- 10.0%	- 1.0%	- 27.5%

Retail Report