Entrepreneurs Haute This Fashion Week

Fashion week is approaching and despite the recession putting a damper on retail sales, industry research firm IBISWorld ranks fashion design as one of the top start-up opportunities for entrepreneurs in 2009. As fashionable clothing is becoming more affordable and consumers start to regain confidence, the Los Angeles-based firm forecasts industry-wide recovery to take place in the second-half of 2010, with an average annualized growth of roughly 6.3 percent in the coming five years.

“Consumer attitudes toward spending are changing, and it’s shaping the direction of fashion,” said George Van Horn, senior analyst at IBISWorld. “Being style-conscious doesn’t mean people aren’t being budget-conscious, and vice versa. Successful fashion houses are those delivering style and quality with affordability, and we can expect this trend to linger for the foreseeable future.”

As the saying goes, cheap is chic. With overall prices being driven down, retailers offering luxury apparel, like Saks Fifth Avenue and Neiman Marcus, have been the hardest hit, cutting costs and discounting stock in an effort to sustain profit margins.

Industry-wide, fashion design businesses have seen significant pressures on margins in recent years, with current levels approaching 6 percent versus 30 percent only a few years ago. The need to retain contracts and ensure ongoing cash flow is yet another factor behind prices going down. Even prestigious designers are bailing on displaying their latest collections on the runway or have declared bankruptcy, such as German fashion house Escada and couture designer Christian Lacroix.

“This has certainly been a make-or-break year for fashion,” said Van Horn, who advices new entrants to differentiate their services based on smart pricing strategies, quality and creative self-marketing, rather than through reliance on advertisement. “In recent years, smaller independent designers have been sprouting like never before, largely attributed to the growing popularity of online retail, as well as relatively low entry barriers and start-up costs. This has helped give the industry the ability to move forward, despite the retail sector taking a big hit.”

Additional links

Fashion Design Services: http://ibisworld.com/industry/default.aspx?indid=1413
Clothing Accessory Stores: http://ibisworld.com/industry/default.aspx?indid=1070
Women’s Clothing Stores: http://ibisworld.com/industry/default.aspx?indid=1067
Big Box Retail Stores: http://ibisworld.com/industry/default.aspx?indid=1092
Miscellaneous Retail Stores: http://ibisworld.com/industry/default.aspx?indid=1106

Less Luster For Tiffany In Jewelry Industry

Sales are lackluster for high-end jewelry retailers this year as Tiffany & Co. is declining much faster than the jewelry industry as whole, according to industry research firm IBISWorld. Analysts at the firm expect industry revenue to fall 4.8 percent to $28.26 billion this year, with price competition from big-box retailers, like Walmart, stealing market share sparkle from traditional jewelry retailers.

“Although luxury shoppers represent a small elite portion of the population, they are the primary target market for high-end jewelers,” said George Van Horn, senior analyst with IBISWorld. “Even the wealthy are cutting back on extra discretionary purchases like jewelry and watches.”

Tiffany is expected to generate earnings per share of about $0.34, which will represent a decline of 46 percent from the $0.63 cents per share compared to the same quarter in 2008. Also, revenue for the quarter is expected to be about $600 million, which will be down 17.3 percent from the $732 million for the same time in 2008.

The fourth quarter of 2009 should see a significant revenue boost compared to the tough Christmas trading period of 2008. It is during this period, the fourth quarter, when jewelry stores will begin to realize more solid returns and better operating performance. As a result, profitability is expected to rise from 10.5 percent of revenue in 2009 to 11.2 percent of revenue in 2010, as luxury spending slowly returns.

While some improvement in industry operating conditions is expected in 2010 as the economy improves, IBISWorld industry risk ratings for jewelry retailing will remain at a very high level. Despite some modest improvement in ratings during the past six months, jewelry retailing continues to have the highest risk rating among the 60 different forms of U.S. retailing that IBISWorld monitors.

Over the coming few years, one of the major challenges for the industry will be the entrance of De Beers into the Jewelry Stores Industry. De Beers is planning to stake its ground as a retailer with a long-term plan to open around 150 stores under the De Beers LV joint venture with LVMH Moet Louis Vuitton. IBISWorld estimates that this move by De Beers will further increase the competition and boost the consolidation that has been under way over the past few years.

“The Jewelry Stores industry is on the precipice of a restructure at both retail and wholesale level that forces players to move quickly to ensure long-term viability,” added Van Horn. “Tiffany will continue to be challenged in finding new ways of selling its products without compromising its brand.”