Blacks Retail Report

Luxury Apparel
January 2006

Table of Contents

The Big Picture
Holiday Fizzle?
Spring Sizzle
Don't Forget - Experiment
Blacks Bottom Line
TrendLines Expert Data

The Big Picture

Although the U.S. economy suffered a series of punches in 2005 it's still standing strong. What's more, it ended on a relative high note, posting 4.1% GDP growth in the third-quarter, compared to the 3.3% gain recorded for the previous quarter. Personal income rose slightly, while consumer confidence soared in December, thanks to lower oil prices and job growth.

Holiday Fizzle?

Still, Christmas sales were strong in some sectors and anemic in others. The week before Christmas was disappointing for some of our better merchants. It was particularly tough for New York retailers who had to deal with a transit strike on top of erratic sales.

Some major high-end and mass market retailers slashed prices on the 26th, but many luxury specialists held onto their integrity (and margins) by handling exchanges and preparing for sales beginning January 3rd. Prudent strategies like these are why specialist retailers typically perform at higher margins and are able to maintain a solid customer base.

Spring Sizzle

It looks as though the current sales trough will last for a few more months at least. Retailers are advised to focus their attention on full-priced sales for February. This means taking the correct level of markdowns now so your floors are empty of Fall and holiday merchandise by the time Spring orders arrive. Merchants should also be banking capital to insure a continual flow of fresh seasonal goods. January is a cleanup month; take advantage of the natural flow of the seasons. And don't forget your sales strategy - think about an incentive program that encourages your staff to move the new merchandise.

January is not only about clearing out last season's goods, but also about looking ahead at Fall ‘06. The women's haute couture and prêt-aporter shows hit Paris at the end of the month, along with the Men's Collective. The Italian shows start in mid-January and should give a good preview of what's to come.

At Blacks, we expect a move away from the heavy black-on-black look we saw for Fall '05. Look for lighter colorations to counteract the darkness of last season.

We also expect sweaters to continue to perform well, especially cashmere. Denim is by no means disappearing but we do expect a downtick. The denim trend has been going strong for some time and consumers are moving to different kinds of casual pants for variation.

Don't Forget - Experiment

While we don't know the exact Fall trends yet, it's important to remember to allocate open-to-buy dollars to new and experimental merchandise. If you don't experiment with new vendors your mix will grow stale.

Establish classes within your inventory structure to use for research and development, and expect losses. If R&D garments consistently sell, move them into your standard sales structure and research elsewhere. This is the only way to find fresh items that sell, and it spreads newness across your inventory.

It's easier to manage this process if you setup experimental classes ahead of time, and budget dollars up front.

Blacks Bottom Line

The amount of margin you generate in February is directly proportional to the amount of margin you have on the floor.

TrendLines Expert Data - Menswear

All data represents 2005 year-over-year data

Clothing	November Sales	90 Day Sales	90 Day Avg. Inventory	90 Day Avg. Markdown
Suits	- 11.2%	- 4.7%	24.6%	- 3.6%
Sportscoats	- 1.0%	2.4%	17.7%	- 9.2%
Blazers	- 22.4%	- 7.8%	- 11.5%	17.5%
Dress Pants	7.0%	7.2%	17.3%	28.5%
Custom Clothing	60.7%	39.5%	N/A	N/A

Furnishings	November Sales	90 Day Sales	90 Day Avg. Inventory	90 Day Avg. Markdown
Dress Shirts	- 18.5%	- 8.9%	- 11.1%	- 30.5%
Neckwear	1.1%	- 0.5%	21.8%	21.6%

Sportswear	November Sales	90 Day Sales	90 Day Avg. Inventory	90 Day Avg. Markdown
Sportshirts	2.7%	- 1.4 %	18.6%	6.5%
Knits	- 15.8%	- 11.8%	- 2.3%	- 39.6%
Sweaters	11.1%	10.2%	15.7%	- 1.4%
Casual Pants	- 13.4%	- 14.9%	- 6.6%	- 40.7%
Jeans	- 18.4%	- 7.6%	56.0%	- 53.4%
Outerwear	- 5.0%	- 7.5%	0.4%	- 6.0%

Retail Report