Blacks Retail Report

Luxury Apparel
January 2008

Table of Contents

• The Big Picture
• The Good And Not So Good News
• Survival Skills
• Blacks Bottom Line

The Big Picture

The word hanging on everyone’s lips these days is "recession." Some analysts believe that we entered into the dreaded "R" word in December when home sales and prices dropped sharply. However, some economic indicators remain strong, such as durable goods orders, which were up 5.2% in December.

While the jury is still out on whether we are in a true recession, the government is preparing a fiscal stimulus package that would alleviate some of the pressure through tax breaks.

The Good And Not So Good News

Business is December was not nearly as bleak as everyone predicted. Menswear sales were down 5% compared to last year, but women’s wear was up 3%, according to Blacks data. Despite media reports that the sky is falling, many retailers still managed to pull out small, single-digit increases.

Menswear buyers are back from market after grappling with the twin challenges of a slowing sales cycle and increased vendor prices. This is what is called 'stagflation,' or a period of stagnation combined with a period of inflation. Some vendors - especially luxury vendors – are trying to counteract declining sales and a weak U.S. dollar with higher prices. Louis Vuitton, for example, recently raised its U.S. prices by 5%.

In addition to stagflation, retailers are also faced with a lack of newness is this season’s fashions. We are still waiting for designers to step up to the plate and give us some fresh and exciting trends to whet customers’ appetites.

Survival Skills

While analysts continue debate the health of the economy, Blacks recommends that retailers sharpen their survival skills by focusing on the dynamics of your own business. Now is the time to reevaluate your expenses – where can you reduce costs and still offer customers a high level of service?

Be assertive about reducing your excess inventory. Tighten your ship and take sharper markdowns if you have to. Hold back a portion of your open-to-buy dollars so you can latch onto in-season trends.

It’s also important to communicate with your staff about the slowing cycle so you can work together to form strategies for success.

And remember that economic slumps present opportunities to strong players. If you are a leader in your community, now is the perfect time to expand or renovate. Rent and construction prices have fallen, so if you have the market and the capital to build, do so.

This storm may last for another six to nine months, but you can use this time to put yourself in a strong position once the clouds have cleared.

Blacks Bottom Line