Blacks Retail Report

Luxury Menswear
May 2005

 

Men’s Inside Track

The typical 18 month positive bell curve is coming to a close. Retailers have been prosperous over a prolonged period of time between 20-22 months. We’re now beginning to see the developments of a new retail cycle. We anticipate a sustained period of slower sales growth and declining trends. Not to be mistaken, this slowdown does not foretell any sort of retail disaster.

During the month of April, consumer confidence slipped for the third straight month. Perhaps even more important is the Expectations Index that measures consumer outlook over the next six months. This index dropped from 93.7 to 87.2 in April. This is its lowest level since July of 2003.

Compounding these issues are the rising costs of fuel that have a direct negative impact on disposable income. In particular, the range from mid-tier department stores to discount operations are at the forefront of these concerns. However, the high end men’s markets are not completely immune to the economic pressures of declining consumer spending and disposable income. Saks and Neiman’s are clearly showing a slow down in positive trends. How long before this has a negative impact on the High End Independent community?

Important to remember: The rising stock market in 2003 lifted the fortunes of investors and pushed sales volumes. This new wealth helped our customers to be more optimistic to spend. Retail operations such as Neiman’s, Sak’s, Tiffany’s and Louis Vuitton had tremendous growth. Today, our customer’s closets are already filled with recent purchases of clothing and sportswear. To compound the situation, their portfolios have continued to decline in 2005: The DOW is down 6.4%, the S&P is down 4.7% and the NASDAQ is down over 10%.

We continue to hear analysts concerns about inflation and some dark corner whispers are becoming voices: Is the economy moving into a recession? How will this impact the high end luxury market that has seen tremendous growth over the past two years?

Innovation

As independent merchants, it’s our opportunity to take risks on innovation and emerging products. We need to be ahead of the curve before mass merchants flood the market with new key items. Our sales people need to be skilled merchants with something unique to offer. We need to understand that luxury expresses a sense of individuality and uniqueness. The product needs to be special and make the customer feel good about himself. We pose this question to the vendor community: Where’s the exciting, fresh innovative product? What will replace the Roma collar, striped shirts, flat front trousers and alligator shirts? Our customers have declining disposable income and need to be motivated to buy. This will prove to be especially important during this pull back in sales growth.

Classification Trending Is Critical

We’re fortunate to be on the front line when it comes to understanding merchandising trends. Each month we receive critical data from over 1,000 retail doors that help us to evaluate independent markets. We’ve been warning and preparing our clients about a retail showdown since the fall of 2004. We understand that sales growth is important, but bottom line profits are king.

Here is the message: Having a clear understanding of your data will lead to better merchandising strategies and greater profits.

Your classification data tells us an important story. Understanding the 90 day classification trends is critical to the future success of your business. This should be the key determinant in forecasting future sales plans, monthly inventories, planned receipts, markdown strategies and OTB dollars. Intuitive methods of making merchandising decisions will only bring you a certain level of success. Can we agree that 99% of us can perform at a higher level?

These retail trends need to be reviewed and analyzed on a monthly basis. If you don’t have a clear understanding of your merchandising data, you may have a serious flaw in your business mode. You’re swimming in valuable data that could have a direct impact on bottom line profits. Study it, learn it and grow with it.