Blacks Retail Report

Luxury Apparel
June / July 2006

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Table of Contents

• The Big Picture
• Clothing Caution
• Denim Update
• Inventory Inspection
• Blacks Bottom Line

 

The Big Picture

An uncertain economic environment and the late arrival of Father's Day got summer off to a slow start for many retailers. June retail sales dipped 0.1%, as high energy costs and interest rate hikes continued to affect consumer spending.

As usual, luxury retailers fared better, but a trend toward luxury 'experience' and lifestyle buying could take a toll on apparel merchants as consumers direct their dollars elsewhere.

 

Clothing Caution

Spring trends continue to point toward more casual looks in men's apparel. While fall will bring some dressier styles, we don't expect clothing sales to be anywhere near the levels we saw in years past. With the decline in suit sales, dress shirts and neckwear are also trending off.

We recommend that merchants buy more casual and active jackets, as this trend continues to thrive. Designers are showing a variety of sporty jackets for next spring, and there's no reason to believe that men won't be drawn to this look, given the increased popularity of casual dressing.

That said, we are cautioning against the designer trend for dressy shorts. It's unlikely that American men will follow this trend, opting instead for casual shorts or cargo pants.

 

Denim Update

Packed closets have led to a dip in sales of designer denim. This saturated market could also be affected by the production of highend denim in China. Most premium denim is produced using expensive Japanese fabric, but Chinese factories have recently begun producing "soft hand" luxury denim, which could lead to lower prices.

If premium jean prices sink toward the $100 mark and away from the $200 level, consumers could go on a buying spree but revenue would drop.

 

Inventory Inspection

At this point in the summer season retailers should be carefully watching their inventory levels in preparation for the arrival of fall goods. Most of our merchants seem to have a handle on their inventory, suggesting that summer sales are going well.

Now is a good time for retailers to assess their financial positions and see if sales patterns are in line with fall buys. Project sellthrough rates on current purchases and make adjustments where necessary. Retailers should plan to speed up stock-to-sales ratios to better insulate themselves from economic shocks.

 

Blacks Bottom Line

Offset economic volatility by increasing turnover rates.