NEW YORK – The rumblings began in early spring, courtesy of a choir of Wall Street analysts.
Retailers, especially those who had failed to jump on the denim bandwagon in 2004, were placing huge orders for the back-to-school season. By May, the majority of analysts were issuing warnings of a “denim glut” that had the potential to wreak havoc on the crucial season. As spring moved into summer, those warnings intensified, ranging from predictions of widespread markdowns to a price war among retailers.
But month after month, consumers proved they had a seemingly insatiable appetite for denim that made it repeatedly one of the top-performing categories throughout 2005. Willingness to pay premium prices also remained high.
According to a survey of 1,000 people conducted by Cotton Inc. in 2004, denim priced at more than $60 experienced a 138 percent growth rate that year. It’s growth that’s being driven by a demographic with significant buying power. According to the survey, the largest group of premium denim purchasers, at 30.3 percent, were shoppers between the ages of 35 and 45.
Confidence remains high among denim executives for 2006. Here, four of them reflect on 2005 and the year ahead.
Thierry Andretta, president, Replay USA
Accomplishments: “I am thrilled to see Replay become a reality on the U.S. market. Our growth has been phenomenal in Europe, but being successful in the U.S. is always a special thing. It’s kind of like the ‘New York, New York’ lyrics. If you can make it there, you can make it anywhere.”
Disappointments: “My biggest sadness has been the death of the founder of Replay, Claudio Buziol. He represented such a great example of the Renaissance man, with interests ranging from art to vintage cars and motorcycles. But what I remember especially was his humanity. Having a simple plate of pasta with him was so relaxing and joyful.”
Goals: “My hope for 2006 is that we will see more young designers succeed in the tough business of fashion. Having worked in this world my whole life, I find it exhilarating to think that there are kids at the Fashion Institute of Technology or in some design school in Europe or the Far East trying to be the next [Karl] Lagerfeld or [Giorgio] Armani. Their dreams and work are the religion of fashion.”
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Dick Gilbert, founder and chief executive officer, Mudd Jeans
Accomplishments: “The best thing that happened to us was that we got new people. We were able to put together a great design team. Getting Jay Gorman [president of sales] helped us regain market share. Because of our transition after being sold in May 2004, we weren’t doing real well. It was nobody’s fault, but we needed experience. Once Jay took over, the last half of the year improved. We’re getting our market share back and we’re getting some big purchases.”
Disappointments: “It’s always tough transitioning after a sale, so we had a rough go.”
Goals: “To get our market share back. We’ve got to pick it up 25 percent [next] year, and we’re off to a flying start. Also, our first Mudd store will open in Shanghai on Jan. 15. Our second store, in Beijing, will open sometime in February. We’re opening one store at a time, and I’m a little nervous. But once we get a formula down, we’ll be opening them by the basket loads. That’s the ultimate goal for 2006.”
Challenges: “When it gets down to the five or six big players [in the industry], it’s going to be very exciting. The smart guy is going to do great. Sophistication on the washing is unbelievable now. It’s going to cause great excitement in the industry.
“The barrier to entry is so low in the apparel business, whenever something gets important or hot, it doesn’t take much to get in. There’s such a glut now. Only the ones with staying power are going to make it in 2006. There are too many giants running jeans companies today that can support a brand with advertising and public relations. It’s easier for the big guys to be partners with the stores. For a small entrepreneur, like I was in 1975, it’s going to be tough. I don’t see the small players being able to hang with the big guys.”
Jeff Lubell, president and ceo, True Religion Apparel
Accomplishments: “We just completed our third year in business. In the first year, we hit $3 million; last year, we hit $27 million, and this year, we broke $100 million – and that’s after chargebacks and returns. Another major accomplishment was going public two years ago. We made the front page of the Los Angeles Times business section and we opened our first retail store [in Manhattan Beach, Calif.]. We’ve been very fortunate.”
Disappointments: “The only negative would be the problem with counterfeits and the people who make money off someone else’s brand. Any jeans company today has to be fearful of them. You need to protect your brand, and I’m going to great lengths to do that.”
Goals: “For 2006, we see a 38 percent to 40 percent growth rate. We want to increase our penetration globally by going into Latin America, Central America, Eastern Europe and going deeper into Asia. We also want to add 10 to 12 new distributors this year and increase distribution in Russia. We also plan to open three more stores this year. We’d love to get into the Forum Shops [at Caesars] in Las Vegas, then maybe New York and either San Francisco or Irvine, down by Newport Beach, Calif.”
Chris Gilbert, president, Paper Denim & Cloth
Accomplishments: “I’m most proud of the development of a full sportswear collection to complement our denim. The collection was received well, beyond even my own expectations. Also, slight changes to our women’s fit for the fall season have given Paper its strongest and most flattering fit. This helped increase women’s sales in the third and fourth quarters, while the market itself was slowing down.”
Disappointments: “Clearly, my greatest frustration of 2005 was our deliveries. We delivered a good product, but months late. Thankfully, we’ve avoided this for spring 2006 and I can’t wait to ship on time. In addition, the women’s premium market has slowed down, which of course, combined with bad deliveries, led to a slightly disappointing year. Actually, the most painful part of my year was watching my Yankees choke once again. At least the Red Sox got swept.”
Goals: “My goal for 2006 is to deliver a line that excites and inspires our customers. In the end, it’s all about product, and I feel our spring line is our most innovative and original to date. And, thankfully, it will be in stores on time, finally.”