- The apparel and textile business blog -
Leonie Barrie's unique web log on the global Apparel and textile industry, key events, people and her own daily experiences. If you would like to offer your comments, opinions, suggest topics or just have a good rant, please feel free to email: Leonie Barrie. |
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Hilfiger buy a one-time opportunity
16th March 2010 16:28
Having had its plans to take Tommy Hilfiger public through an initial public offering scuppered because of the recession, the company's management is not surprisingly putting a bright face on the $3bn takeover deal agreed yesterday with Phillips-Van Heusen.
Describing it as a "once in a lifetime" opportunity, the synergies between the two firms are apparent. Hilfiger's presence in Europe and Asia will provide an international stepping stone for some of PVH's brands to follow suit, while the combined strength of the companies - with their joint global revenues of $4.6bn - will give Hilfiger additional clout for growth, especially in retail.
If reassurance were needed then it comes in the shape of Calvin Klein, which PVH bought in 2003 for $430m. The contemporary fashion brand has consistently led buoyant results at the apparel maker, with a 20% jump in royalties expected in the fourth quarter. Yet the label has managed to retain its own brand and identity despite being part of a multi-billion dollar business.
The only fly in the ointment, perhaps, is the $2.5bn debt involved, which has prompted some analysts to consider cutting their ratings on PVH.
The deal will also have raised hopes that more takeovers may be in the pipeline, after flagging up the opportunities that now exist in an industry that has been buffeted by falling sales for the best part of two years. Companies like Hanesbrands and Li & Fung have made no secret of the fact they're interested in buying other firms, and smaller but well-established brands may prove ideal targets.
Spotlight on...Tommy Hilfiger buyout
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Martin+Osa on the way out
15th March 2010 12:53
In a move that was not entirely unexpected, US teen apparel retailer American Eagle Outfitters has finally decided to pull the plug on its loss-making Martin+Osa business after it failed to justify further investment. The closure affects all 28 Martin+Osa stores and its online business, and comes after the concept generated a loss of US$44m in fiscal 2009.
American Eagle said it would focus its efforts and resources on its remaining brands, including AE, Aerie and 77kids. The decision was announced as the retailer revealed higher sales and lower markdowns had combined to end the fourth quarter on a high, with profit soaring 81.3% to $59.3m.
Foot Locker, meanwhile, is poised to enter a new era of expansion, vowing to lift annual sales by 25% to US$6bn over the next five years. Outlining its "strategic vision" to investors in New York last week, the retailer said longer term increases will come from a more diverse customer base, expansion and potential acquisitions. Growth in apparel and in new markets such as central and south America and Asia are all key to its vision.
For retail giants Wal-Mart and Marks and Spencer (M&S), however, greener business practices are the focus for bottom line growth and better efficiencies. But while the garment industry's global supply network gives it a key role to play in leading the push towards sustainability and eco-friendly production, there are also calls for the sector to work together if it is to avoid the errors of compliance.
Auditing and compliance also raised its head last week in Bangladesh, after workers' unions and international labour-rights organisations called for an overhaul of safety regulations after a fire killed 21 people at a garment factory last month. The labour rights groups also hit out at Wal-Mart and Marks Workwear House - even though the two companies no longer sourced from the factory. This now raises the question of how accountable retailers should be for the parts of the supply chain they don't control?
Retaliatory measures are top of the agenda for Brazil, which is set to impose a 100% tariff on imports of US cotton in a series of moves against US cotton subsidies. The action, which also includes the imposition of tariffs against other US products, has the backing of the World Trade Organisation (WTO), which ruled last year that the US had spent too much on cotton subsidies and export credit guarantees. The measures will come into effect within 30 days unless the two countries can agree a compromise.
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Cottoning on to manufacturing
12th March 2010 14:14
If it's Thursday it must be London again, so it was down to the Smoke for Lawson's press briefing to launch its latest software gizmo.
After lapping Cavendish Square several times on a freezing March morning in a bid to find the UKFT fashion and textile headquarters, I eventually stumbled across the the venue and made my way to the lift.
A group of us found ourselves standing in front of that lift - a rather handsome machine reminiscent of a smart Parisian apartment block - although without the terrifying Madame eyeing everyone - and pulled back the shutters to make the ascent.
Having pressed level 4 as requested by Lawson, we jerked our way upwards only to find the lift stubbornly refusing to progress any further beyond 3. Vainly pushing 4 again, the lift rumbled all the way back down before lurching back up.
After several such excursions - cue nervous comments about Sir Stirling Moss' unexpected lift detour this week - the group took the collective decision to abandon the contraption at level 3. Which turned out to be the Lawson floor after all.
Into the conference proper after having weaselled my way into the buffet for buyers in the morning session, first up was the Lawson general manager glorying under the name of Frederic Champalbert.
The boss lives in Lyon and confided his extreme surprise at Lyon beating the mighty Real Madrid the previous evening - before launching into his take on the state of the industry.
But Lawson's star turn is undoubtedly its industry strategy director and Clive James sound-alike Bob McKee. And batting away my moans about the British winter with a - "I live in Chicago, time to put some sun cream on" - Bob, who has been catapulted off aircraft carriers during his time in the US navy - gave a rousing tour de force of the fashion business - and the odd company plug for its Lawson for Fashion all-singing, all-dancing software tool.
McKee turned his attention to the hot topic of the day - notably China. "There have been be-alls and end-alls before," he noted, before making the astute observation: "China sends a lot of its work to Vietnam and Cambodia" as coastal cities such as Shanghai have high labour costs.
Just in case Bob got too carried away with his impressive oration - delivered to the glowering backdrop of the BBC - "GBP100m over budget" as one delegate was heard to grumble - a strategically-placed Lawson employee had cards with "5min" and "2min" on them to make sure the genial American was on time.
Peering anxiously at the time-limiting cards and highlighting the dearth of British clothing manufacturing from a country that once ruled the textile world, Bob finished with a bold battle cry: "There will be mills in Yorkshire again," he exclaimed.
"Even the Romans outsourced to England."
By Simon Warburton.
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Fast fashion moguls make rich list
11th March 2010 16:56
A number of fashion entrepreneurs sit proudly on the 2010 Forbes list of the global billionaires today (11 March).
The morning headlines went to Carlos Slim Helu, the Mexican telecom guru who overtook Internet pioneer Bill Gates to top this year's list.
While there is a US$0.5bn gap in riches between the two, neither will lose any sleep with more than $53bn in the bank.
The fashion hierarchy is led by the man behind luxury goods firm LVMH, Bernard Arnault, who is seventh with a net worth of $27.5bn.
The chart also features the founders of leading fast fashion chains, which are clearly raking it in selling cheap clothing at large volumes, and expanding globally.
Amancio Ortega, the operator of the Inditex Group of fashion chains, came in ninth with a net worth of $25.0bn, while chairman of Hennes & Mauritz (H&M), Stefan Persson, is reportedly worth $22.9bn and finished in 13th spot.
Various people behind Wal-Mart have also acquired considerable wealth through retail, according to Forbes.
By Joe Ayling.
Click here to view the entire list.
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Retailers weather February storms
8th March 2010 13:19
Despite fears that heavy snowstorms on the east coast of the United States would hurt February retail sales, the latest results released last week suggest apparel shoppers refused to be put off by wintry weather. In fact, estimates say the nation's retailers saw their strongest monthly same-store sales in over two years.
Easy year-on-year comparisons no doubt helped lift the numbers, but retailers are taking comfort from the fact consumers are starting to make some of the purchases they put off during the recession - even though they still remain focused on deals. Another positive is that pricing continues to remain strong, with retailers avoiding extreme discounting to drive traffic to their stores.
The focus is now shifting to March and April for signs of a sustained turnaround in consumer demand. By then, spring lines will be fully in-store, and an earlier Easter is likely to give an extra boost to March revenues.
For retailers in the EU, a cloud is still hanging over the sourcing of leather-upper shoes from China and Vietnam after a European court dismissed Chinese claims that anti-dumping duties on footwear imports from these countries was unfair. Beijing filed a complaint with the World Trade Organization (WTO) last month, after the EU extended anti-dumping tariffs by another 15 months. If the two sides now fail to reach an agreement, the WTO complaints body will rule on the case.
Marks and Spencer, meanwhile, is aiming to become the "world's most sustainable retailer" by 2015, with the addition of 80 more commitments under its Plan A "eco-plan". It wants to see at least half of its clothing lines with at least one sustainable or ethical quality, and has promised to "bring clarity" to the living-wage debate for workers in Bangladesh, Sri Lanka and India. The boss of the UK retailer separately told a conference in London that investing in sustainability will grow the business.
The UK's biggest supermarket retailer, Tesco, has also committed to improving overseas factory workers' wages - and says it wants to make its Florence & Fred (F&F) line the world's biggest fashion brand within five years. As well as the UK, the range is now expanding into Thailand, South Korea and Malaysia, and the company believes that increasing productivity at its sourcing factories should lead to higher wages and better value for customers.
Swingeing increases in freight costs are also forcing retailers to evaluate ever-more creative ways of driving down expenses. Speaking at a sourcing round table last week, a group of influential retailers highlighted the exponentially rising price of shipping, which in some cases has soared up to 200%. Forming tighter relationships with overseas factories in tandem with freight forwarders is key, they said, adding that there comes a point at which driving source costs down could impact quality.
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Green gets shirty
4th March 2010 16:34
Having already startled the 200 or so delegates at the Retail World Conference in London this week by maintaining his F&F range would become the world's top fashion brand, Tesco CEO UK Clothing Terry Green had another trick up his sleeve.
Or rather on his chest. Sporting what looked like a very snazzy shirt indeed, Green revealed he had marched into a store - he modestly declined to reveal which one - and promptly handed over a cool GBP275 (US$414) for the garment.
Never mind what salary Green must be on to afford such largesse - and it's safe to assume he's not about to take in washing - the clothing CEO triumphantly announced: "It's made in the same factory we make our shirts." And then the coup de grace: "I'm going to source this fabric and sell it in our F&F range for GBP25!"
The audience murmured appreciatively at the theatre of it all, although it's not known if any Jermyn Street retailers who may have been in the audience, shared quite the same enthusiasm.
And not just content with his shirt stunt, Green aimed both barrels at Sir Stuart Rose who had gone several combative rounds in the ring with the conference host earlier in the day.
"Rose is missing the point," he boomed, (It's a fair bet Sir Stuart hasn't been addressed by just his surname for some time) before proceeding to claim world domination for the F&F range in a few, short years.
Green was on parade at 12:30 and had gamely hung around all morning to listen to the various speakers - unlike Charlie Mayfield and er, Rose, who had swept imperiously out of the auditorium as soon as their deliveries were over.
He also treated us to a sepia-tinted trip down memory lane, neatly summarising decade by decade various fashions and styles and even revealing his parents would periodically stroll down to the local working men's club gloriously dressed in a fur coat and suit.
So on to the sourcing debate which - although in the post-lunch graveyard slot - was enlivened by Debenhams' divisional trading director Adam Creasey, who looked - and sounded - as if he'd be perfectly at home in an East End boxing club.
Discussing the dangers of driving down supplier costs so far it became counter-productive, Creasey sought an analogy and plumped for the car world. "A fabric yarn count could be a Rolls-Royce or a Lada," he announced before adding: "You might end up with a Volkswagen."
He paused, desperately seeking another manufacturer. "Or a Toyota!"
Poor old Toyota, they even take a bashing at a retail conference.
By Simon Warburton.
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RWC 2010 - the highlights
3rd March 2010 17:48
To London then on the rattler to attend Retail Week's annual beano for the great and good of the industry. And Sir Stuart Rose.
Twitterers, witterers and even some old-fashioned hacks with pens and notebooks packed the 200-strong gathering, which at times with its massed ranks of black suits resembled something akin to a Chinese plenary session.
First on parade was John Lewis boss Charlie Mayfield – the media man of the moment - and who appears to have a queue of politicians beating a path to his door with the John Lewis Partnership cooperative scheme that yielded a remarkable GBP120m in bonuses last year – not just to the top brass – but to every man jack. A few of the suits shifted a little uncomfortably at that presumption.
Charlie's mike packed up rather unfortunately around 30secs into his delivery and he carried on blissfully unaware while a technician fussed around his lapel. It allowed at least the genial host Declan Curry, to quip that any speakers not making an impression within 2min would be off, X-Factor-style.
After Mayfield's genial urbanity came a extraordinarily forensic analysis of the global economic meltdown from Aurora Fashions' non-exec president Stewart Binnie, who delivered a blizzard of statistics.
And Binnie managed to distill the whole mess into one telling and killer fact. Namely, that the UK managed to hose away in just two weeks of unparalleled charity to the banks, roughly the same amount yielded from 11 years of privatisation receipts under the Thatcher government. Yikes.
But then, waiting in the wings - and was that just a suspicion of tan in the winter gloom? - lurked George W Bush lookalike and Knight of the Realm, Stuart Rose. He went on the offensive immediately, having apparently made a tour of TV studios this week as his successor's apparent GBP15m remuneration package was dissected in minute detail.
No shrinking violet, Rose was the antithesis to Mayfield's calm, reeling off myriad amounts of detail with consummate ease and made a claim to save the planet as well, dismissing “flat-earthists” and politicians with equal disdain in his zeal for sustainability.
Having firmly defended his successor's reported salary, Rose also mused on his own future. “I've earned the right to a bit more fun,” he said, before launching a fresh attack (does the man ever relax?) on anti-capitalists. “Business has been partly demonised,” he thundered because of what has happened to the banks. “Creation of wealth is good.”
But as an antidote to all the polar bear saving and gloomy economic models, up bounced three girls who are London's entry in the Retail Futures Challenge.
And the students had come up with a cracker. Rightly identifying that just about every male on the planet has an inbuilt antipathy to darkening any shop door, the trio have come up with the 'Apples and Pears' clothes shop concept.
Based on cockney rhyming slang for 'stairs,' Apples and Pears is a retail outlet based on what the girls maintain is “men's perfect shopping experience” - the pub.
With pool tables, darts, non-stop sport on TV and even a tattoo parlour, the idea is for men - “roadsweeper to goalkeeper” to be able to shop in an environment in which they are highly trained.
It's a corker of an idea, although the nagging question of whether, er, beer, might actually be sold was left tantalisingly in the balance. Who knows what jeans and tattoos they might end up with?
By Simon Warburton.
Click here to read more of Simon Warburton's coverage of Retail Week Conference 2010.
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Matchmaking in Macedonia
2nd March 2010 18:37
"I don't know why I haven't considered Macedonia before," one UK sourcing executive said to me last night, "it just hasn't been on my radar." And he's not alone. Many buyers also admitted one of the most difficult parts of their jobs is identifying new countries from which to source production, and then negotiating the minefield of possible suppliers that will eventually take them to the right factories to make their garments.
So the 'Macedonia-EU apparel business to business event' which took place for the first time today was a perfect opportunity to bring together fashion retailers and brands with a potential new supply base offering low production costs, the flexibility to produce small orders, high quality and a fast turnaround. What's not to like?
The idea is a simple one: take more than 20 Macedonian apparel companies and put them in a room together with buyers from the UK, Austria and Germany. If it felt a bit like matchmaking, that's probably because it was. But with participants encouraged to rotate from one table to another every half-hour or so, it was also a bit like speed dating - with companies chatting about their requirements and looking at samples before making a decision to go on a second date tomorrow in the form of a factory visit.
Joking aside, it really is a brilliant way to meet a new manufacturing partner, and an idea that would surely be welcomed if it was adopted in more countries. And, sticking with the dating analogy, it will be interesting to see how many marriages - or should that be new export deals - eventually come out of it.
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Li & Fung sets sights on Europe
1st March 2010 13:22
Sourcing giant Li & Fung further strengthened its own portfolio at the end of last week, when it acquired private-label apparel supplier Visage Group.
The deal is a further sign of Hong Kong-based Li & Fung's intention to grow a stable of worldwide businesses in addition to its sourcing activities for major brands and retailers.
It follows recent acquisitions of US-based children's wear maker Wear Me Apparel and handbag importer Van Zeeland.
That is not to say Li & Fung is letting up on sourcing by any means, having inked important supply chain deals with US retailers including The Talbots, Hudson's Bay, Liz Claiborne and Wal-Mart in the past year alone.
Li & Fung will pay up to GBP173m (US$264m) for UK-based Visage, which designs, imports and distributes fashion wear.
Visage, which operates in Manchester, employs over 500 people and in 2009 posted 16% turnover growth to GBP190m for the full fiscal year. It also has branches in Shanghai, Guangzhou, Dhaka and Delhi, aligning it well with Li & Fung's existing global network.
More importantly though, the Visage acquisition fits with Li & Fung's strategy of boosting its onshore presence in Europe. "This acquisition dramatically strengthens LF Europe's growth platform," says Li & Fung president Bruce Rockowitz.
Meanwhile, global retailer Gap Inc also announced investments in a European market last week, planning its first stores in Italy. The foray will see Gap and Banana Republic flagship stores open side by side in Milan this year.
By Joe Ayling, news editor.
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Value is in style
25th February 2010 19:25
“Regardless of whether the economy is weak or strong, value isn’t going out of style,” The TJX Companies’ CEO Carol Meyrowitz told analysts yesterday.
But her comments, intended to reassure investors that the off-price retailer’s new-found shoppers aren’t going to desert its stores now that the economy seems to be in rebound, will also have struck a chord at the other end of the retail spectrum.
Stephen I Sadove, chairman and CEO of upscale department store retailer Saks Inc, separately told analysts its customers want “service and differentiated products with value” – and that it intends to offer them more designer products at lower prices.
But there’s a big difference between “value” and “value for money” – and it’s the latter that will be key going forward.
Shoppers of the future might be prepared to pay a little bit more for a garment, but they’ll only buy one rather than several of the cheapest versions. And that’s what retailers will have to contend with this year – meaning they’ll have to work a bit harder to secure growth.
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