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Tiffany Montgomery
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A closer look at the climate for juniors

By Tiffany Montgomery
June 23, 2008 5:15 AM

One of my loyal readers gave me a good idea. He was confused by the different data coming out of the juniors market. The juniors category at PacSun is doing well, but some industry brands reported softness in their latest results. He asked me to give him a better understanding of what's happening out there.

That led me to talk to several retailers and brands and sift through some data. Today, I'll write about what's happening with the juniors market overall. Tomorrow, I'll share what some individual retailers have to say about the category. And Wednesday, I'm planning to write about a brand that is new but getting traction.

While juniors has been tough for many retailers and manufacturers, there are always exceptions.

Lost International CEO Joel Cooper, for example, told me that the brand's new juniors line is doing great and has been a real bright spot this year. Also, some retailers I spoke with said their juniors sections were recording positive same-store sales.

To go beyond individual results, I looked at data that measures a broader swath of juniors sales. I also reviewed how juniors is going for publicly-traded companies.

Overall, teenage girls appear to have trimmed their discretionary spending at the mall and at independent stores. Also, some industry brands have been hurt by PacSun's decision to carry more juniors private label clothing and less inventory from industry brands.

The broad view

Inside and outside the industry, the juniors and women's market in general has been tough across most price tiers and distribution channels.

According to ActionWatch, juniors sales fell 6.4 percent at independent board stores in the first quarter compared to a 12.2 percent increase for men. (See chart at the end for more details)

The strongest performing categories were dresses, warm tops such as sweaters and jackets and tanks.

Retailers surveyed in the first quarter Baird Boardsport Report cited women's apparel and shoes as their weakest categories.

Mainstream retailers have reported similar trends for the first quarter. Juniors sales fell 11 percent at American Eagle Outfitters and in the low double digits at Hollister. Macy's cited women's ready to wear as one of its weakest categories.

There are several factors causing the softness, according to Liz Pierce, an analyst with Roth Capital Partners. The economy, a strange spring break schedule, bad weather during the first quarter, and lack of a big new fashion trend.

The biggest problem, however, is traffic is down at shopping centers.

"They are just not coming as often (to the stores)," she said. "A lot of buys are impulse buys when they're at the mall with nothing better to do."

Pierce also believes high gas prices are leading teens to cut back their shopping trips.

Industry manufacturers

I asked Marty Samuels, president of Quiksilver Americas, why he thought the female category across the broad apparel market was tough.

"Often, it's purely discretionary fashion buying and in tough economic times, without too much pain and suffering, people can slightly cut back," he said. "Plus, there's not some knockout, massive trend going on."

Roxy sales were down in the first quarter in the company's three reporting segments: the U.S., Europe and Australia/Asia Pacific, according to Quiksilver's public filings.

Volcom girls product sales fell 17 percent in the U.S. in the first quarter.

Results for many industry brands that counted PacSun as their biggest customer for juniors have been hurt by PacSun's decision to carry more inventory from its private label brands and less from industry brands.

Volcom, for instance, said in its first quarter conference call that excluding PacSun, girls product sales in the U.S. were up 1 percent. Volcom's PacSun business was also impacted by some "misses" in fit for dresses and tanks last year in the first quarter that lead to some lost business in the first quarter this year, the company said.

PacSun now carries 50 percent private label and 50 percent industry brands in juniors. At an investors conference this month, PacSun CEO Sally Frame Kasaks said the mix at times may go as high as 60 or 70 percent private label.

Previously, industry brands comprised 60 to 65 percent of the apparel mix, according to PacSun's annual report.

The philosophy behind the switch is that PacSun believes girls are less brand conscious and more into fashion. It also believes industry brands aren't as strong in denim, and has relaunched its in-house Bullhead denim line with the latest fits and washes.

While the strategy shift has hurt many industry brands, it has helped PacSun.

The juniors category at PacSun has been posting big increases in sales. For the first quarter, juniors comp stores sales increased 23 percent led by denim, tops and dresses. For fiscal 2007, juniors comp sales increased 20 percent.

One of the industry brand that has weathered the storm according to its public statements is Billabong. The data for Billabong, publicly traded in Australia, is dated because the company releases results every six months instead of every quarter.

In its results for the six months ending Dec. 31, 2007, Billabong executives said its girls business for both Billabong and Element Eden recorded "excellent growth."

The company also said sales of the Billabong brand grew at PacSun during that time period while sales of skateboard brand Element fell. The statement did not specify if the growth at PacSun came from Billabong men's or women's or both genders.

What manufacturers can do

Given the tough economic environment, I asked Marty Samuels what he and other executive can do in times like these.

He said at Roxy, he tries to keep the product people sheltered from the business storm. He wants to create an environment where merchandisers and designers can feel creative, happy and positive.

Roxy is also focusing on marketing and "how to use more marketing dollars to do actual advertising," he said. "Whether it's more print, internet or Fuel TV - I don't know the form yet - but more of our dollars will be spent to improve brands awareness."

In the meantime, Quiksilver is managing its inventories conservatively. Retailers want to shift more of the risk to manufacturers and there will likely be more conservative prebook at every level, he said, with retailers assuming there will be product out there if sales pick up. Marty said given that there is an over supply of suppliers, there probably will be product available. But at Quiksilver, the company is being conservative with inventory and keeping it at a reasonable level.

Also, it helps that Quiksilver has a portfolio of brands to balance results. Quiksilver is looking to DC Shoes as its growth vehicle right now, Marty said.

Coming tomorrow: A look at juniors sales for several key boardsport accounts.

Below, ActionWatch first quarter sales by category:

Actionwatch chart Q1 2008



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