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Byline: Ross Tucker With contributions from Ellen Groves
By the Numbers
Withering consumer interest and a weakening economy have dealt the denim industry a one-two punch over the last year, and the sting may be felt into 2009.
Industry veterans are taking solace in the belief that denim's boom times are never followed by a bust. Growth slows, the market naturally culls those brands that were too weak to survive, but the bottom never really drops out.
Given the proliferation of brands that occurred since 2000, particularly in the premium segment, there was little surprise when the first signs of a shakeout emerged in 2006. It was welcomed by long-established brands, and as the process of weeding out some of the labels that had cashed in on the craze gained steam, the top-tier players regained their space on store shelves. However, women's closets were overflowing with denim by that time and their interest shifted to dresses and accessories.
Over the last several months, the prolonged war in Iraq, the subprime mortgage crisis and soaring fuel prices have stoked fears of a recession and left consumers thinking twice before parting with their disposable income. Denim hasn't been immune.
Evidence of the weak domestic retail environment has appeared in the financial results of retailers and the manufacturers who supply them. VF Corp.'s jeanswear business, home to Lee and Wrangler, saw revenues fall 6.4 percent to $712.2 million during the first quarter of 2008.
However, "the first quarter is not representative of what we expect from our jeanswear business for the rest of the year," said Eric Wiseman, VF's president and chief executive officer, during a conference call with analysts.
According to Wiseman, there is evidence of the economic situation pushing consumers down the price spectrum.
"In times like this, some consumers flock to more value price points. That happens in every channel of distribution," he said. "That's not where our strong brands exist, nor is it where we want them to exist."
Levi Strauss & Co. saw first-quarter revenues in the Americas fall 2 percent to $580 million compared with a year earlier. The decline was attributed to a decrease in the women's wholesale business, as well as the continued slump of the Signature by Levi Strauss mass channel brand. VF and Levi's are both expecting to face challenges for the remainder of the year, as stores become more conservative in their buying.
Despite the negative sentiment surrounding retail, statistics from market research firm The NPD Group validate industry veterans' faith in denim. Women's …