More Thoughts on "Cheap" PDC Jeans

Phil over at the Millionaire Socialite blog has done some deep thinking on Paper Denim & Cloth's (PDC's) recent announcement to move its price point downward. He calls this a signal of "impending economic shift in new luxury fashion goods." There are several good points I have trouble disagreeing with. Nonetheless, I'll give my own take on a bit of what he presents.

He predicts that other premium jeans makers (whose back pocket embroideries are probably already recognizable) will join the fray by pricing competitively with PDC in the $100-160 range. I am personally rooting for this to be fulfilled. Almost every week we hear of a new entrant to the premium jeans biz with its own angle. Without exits from this already crowded market the ultra exclusive makers of status symbol jeans must continually drive up prices in conjunction with efforts to differentiate themselves from the simply expensive jeans. PDC's exodus, if followed by its peers, will alleviate some of the pressure to maintain this trend.

To illustrate: How long can the house of quality custom-made jeans keep their prices equal to similar construction, off-the-rack jeans from Saks? And to maintain this without making their core customers scratch their heads or even feel a bit alienated?

What I do not look forward to is companies like True Religion creating additional fashion lines that 1) allow them to compete in the non-exclusive, semi-premium price point and 2) try to maintain their label's premium position. A la Ralph Lauren Polo's Chaps (You remember--Can't Have A Polo Shirt = CHAPS). I can already see the headlines: "True Religion unveils new Missionary line..." In my opinion, this will wither away brand karma and may hurt overall construction quality (as supposedly separate production processes get streamlined).

But what happens if True Religion sees opportunities in the mid-market-- having observed a quarter of PDC's endeavors-- and forms a subsidiary label to compete? Here, I'll take a reactionary approach and leave it to competent thinkers like the Millionaire Socialite to analyze.

Millionaire Socialite


UPDATED (2/1/06): This post has made it into the blogging carnival that discusses the State of the Fashion Union for Fashionweek (Feb. 3-10). Thanks to Julie over at Almost Girl for graciously inviting me. Check out her daily summaries of union(ized??) bloggers.

True Religion CFO Webcast

Charles Lesser, True Religion's CFO, will be presenting at the Brean Murray Small Cap Institutional Conference on January 31, 2006 in NYC's Grand Hyatt Hotel. 10:30-10:55 ET.

A live webcast will be available on the True Religion website.

No, we don't expect any new jeans announcements at a conference for small cap. public companies. This will likely be very boring and is intended for those in the business following TR's performance.

Queer Eye for the Straight Shooter

Apparently the box office success of Ang Lee's Brokeback Mountain has inspired fashion houses around the world to mix Western/cowboy elements into their upcoming styles.

According to UK's Telegraph, "All the major designer brands have included some element of Western dress in their collections for spring and summer, and if the current designer menswear shows for autumn and winter are any indication, it's going to continue into next season," says David Walker-Smith (in charge of Selfridges's menswear). Count in Prada, Dolce & Gabbana, Paul Smith, Diesel and DSquared2.

Some of you can exhale and rejoice if you were worried about the bootcut getting gunslinged by buyers and designers who are apparently favoring slim, skinny jeans right now.

For me, regardless of what the fashion sheriffs have to say, I'll be wearing my bootcuts for a long time.


Telegraph


UPDATED (1/31/06): So the Oscar nominations are in. Brokeback Mountain takes the lead with 8 nominations, reports CNN's Todd Leopold. Viva la boot.

CNN

Denim Bread and Butter

According to Emilie Marsh of WWD (yes them again), denim buzz at Bread & Butter (Barcelona)trade show as follows:

• Skinny fits
• Slimmer legs
• Darker washes
• Raw/Unwashed jeans
• Eco-friendly jeans

No surprises here based on the trends at other shows, like Project.

PDC Wants Less of Your Paper for Their Denim

So the WWD is reporting that Paper Denim & Cloth will be dropping retail prices from <$150 to 240> to <$100 to 160>.

All this in the hopes of driving volumes.

My take on it is this is a bad move for its loyal, existing core customers, which frequently extoll the merits of PDC on denim head forums like superfuture's supertalk and Style Forum. The action tells you, the loyal customer, one of either two things:

a) You may have been paying too much money for your PDC jeans. Their margins were so high that they are now willing to risk some of it in hopes of selling more to be able to drive up the bottom line. In effect, you subsidized their move into the lower price point (although the brand may very well still be considered premium in many circles).

and/or

b) PDC will be selling now for a lower price by suffering quality. This will especially be true if, after the price reduction, volumes are not pushed as expected to cover the loss in the resulting margin reduction. Something has to cover the margin and that may be cost, which often correlates with quality. That means you probably shouldn't buy any future productions if you are only interested in quality at their <$150 to 240> level.

Quoting from Michael Silver (Pres., Silver Jeans), from the WWD article, "The curiosity is how is it possible to sell a jean one week at $180 and then the next at $100."

How indeed?

I haven't had enough time to disgest all of the implications yet but that is what I have for now. Of course I can stand to be corrected on any of my points so feel free to do so!

Paper Denim & Cloth

Drama on Tommy's Hill

So according to Sowood Capital Management LP (including Sowood Alpha Fund LP) , a fund in Boston that effectively holds 5,798,000 voting shares of Tommy Hilfiger Corporation (TOM), selling TOM to Apax Partners for only $1.6 billion is a bad idea.

We learn of this via Sowood's SEC filing yesterday, which states that Sowood sent a letter to Hilfiger's board stating that selling at the agreed price of $16.80 would undervalue the company's fair value of $19.50 to $27.00. More interestingly, Sowood accuses Tommy Hilfiger (the man) of accepting a favorable but questionable personal deal outside of the TOM/Apax merger terms.

Considering Sowood owns 6.3% of TOM as of the filing, what it has to say must be troubling to both TOM management and the suits at Apax.

Edit (1/24/06): As an aside--according to Seattle Post Intelligence's Venture Capital: Investors fuel push for poop power, Sowood is the largest investor in a venture to harness the power of crap.

Sowood's SC 13D Filing

Gordon Harton Leaving Lee

Quick blurb: Gordon Harton, President of Lee Jeans (VF Corp. subsidiary), announced he will be officially retiring from his post on April 1.

Maybe he's just setting us up for an April Fools gag...

7 for All Mankind Loses #1

If word on the street is true, Andreas Kurz, CEO of 7 for All Mankind, will be leaving (or has left) the premium jeans company. With no formal details at the time of this writing, news of this separation comes as a surprise considering Kurz filled the post only last March after founder Peter Koral sold half his company to Bear Stearns Merchant Banking.

Having garnered experience as CEO of Hugo Boss USA and Diesel USA, Kurz was poised to bring 7 for All Mankind into the luxury goods world stage through both its denim and non-denim products. One can only speculate how the company, already shunned by many denim-heads for being too mass marketed and mainstream, will change if Peter Koral takes back the reins.

Tracking the Trend Through Supply

At the Project trade show here in NYC buyer buzz seems to have revolved around cleaner and darker washes on darker fabrics and skinny cuts.

I actually like quite a bit of subtle, tasteful destruction on my Friday jeans. So for the next season I may finally get around to looking at some Japanese selvedge and Levi Vintage Clothing imports.

What's in the Crate?

DNR printed an article today about LA-based Crate Denim, started and run by Chad Hilton, Jason Fischer, and Tim Arnold. Their niche is making jeans with discontinued fabric stock from U.S. mills. "Most everything we use was made between 1965 and 1978," says Hilton. This adds to the uniqueness of their line, but is it a sustainable differentiator? I'll be keeping an eye on them.

Selling in American Rag, The Closet, Fred Segal, Isetan (Japan) and Barneys'.

Are Your Levis iPod Compatible?

Levi announced that they will sell RedWire(TM) DLX Jeans, which are compatible with your iPod. What does that mean? Well a docking system in the side pocket of seemingly normal Levi's will carry and conceal the iPod comfortably (?) and allow you to control it via a joystick in the watch pocket. There's even a cord organizer. All this and you can wash them too (but just in case, why not make it in ring ring selvedge so nobody would wash them?)
Although the RedWires will be compatible with most iPods, I'm interested in seeing how these jeans will let me carry my wafer thin Nano without cracking the screen.
They were not ready to show any pic or talk about pricing but could not resist trying to start some buzz during the week of MacWorld. Sigh...marketing guys.

Levi's Press Release