California Apparel News

Gap Inc.’s recent rollout of its $59.50 1969 Premium Jeans has many in the fashion industry wondering if this means premium-denim labels will have to start whittling away at their $150-and-up price tags to remain competitive.

With an aggressive ad campaign splashed across fashion magazines and plastered on billboards, Gap is touting the exceptional fit and low price of its jeans that hit stores in mid-August. The jeans’ 12 core fits look great and have a premium-denim whimsical touch with large lettering on the interior explaining how each jean was washed according to strict clean-water guidelines.

Still, many in the industry don’t think the 1969 label measures up to the standards of the tried-and-true premium labels that use top-notch Italian and Japanese denim and are manufactured in Los Angeles. Gap is making its 1969 label primarily in China and Mexico. And while the San Francisco company won’t reveal where its fabric comes from, the price point suggests it is using a good quantity of Chinese and Mexican denim for the relaunched label, named for Gap’s debut year. Gap executives did not return phone calls for this article.

“I think the Gap is going to have some impact, but I don’t think it is going to shake up the overall retail environment,” said Stefano Aldighieri, a denim designer who has worked for 7 For All Mankind, Levi’s Premium and Hudson Clothing Co. He is also the co-founder of the Los Angeles consulting firm Another Design Studio Inc. “But you can find premium denim at any price point and at any distribution. If you go to JCPenney or Sears, you will find examples of what they call premium denim. Then you go to Barneys and see their premium denim. Premium denim has become an obsolete word.”

Gap has put a lot of effort into launching the 1969 label. The normally secretive and press-shy company has trotted out Executive Vice President of Design Patrick Robinson for interviews. The company opened up an exclusive 1969 pop-up store on Los Angeles’ hot shopping street Robertson Boulevard as well as on New York’s Fifth Avenue. It even had New York Stock Exchange traders swap suits for the 1969 jeans label on Aug. 21’s casual Friday.

“They started marketing heavily in August,” said Betty Chen, a specialty-store retail analyst with Wedbush Morgan Securities. “In the recent year or two, we haven’t seen that kind of marketing support behind the Gap brand. Management in the past acknowledged they felt their product then was lackluster and why spend advertising dollars. Finally, they feel they do have a product worth calling out.”

While Gap does not separate out sales by products, Chen noted that the 1969 label has done well among New York and Los Angeles shoppers. In particular, the skinny-leg jean and the long-and-lean silhouette have been popular sellers. Also, smaller sizes have been disappearing off the shelves faster than larger sizes. “That means more fashion-oriented customers are buying the product,” Chen said.

Needless to say, Chen doesn’t believe Gap’s $59.50 price point, which was introduced with a $20 discount offer, will nudge the traditional premium-denim lines, such as 7 For All Mankind and True Religion, to pare down their $150 to $250 price tags. “You will still have a select group of customers who will appreciate premium denim for their different elements than the Gap offers,” Chen said.

Roseanne Morrison, fashion director for The Doneger Group, a trend and merchandise advisory firm headquartered in New York, concurred. “I think people understand there is premium denim and then there is premium denim. I think people who pay more want a certain label. They want something more,” Morrison said. “It is really two different consumer bases and a very different product.”

Denim dudes

Premium-denim makers aren’t about to let Gap dictate their price decisions or styles. They are unanimous in towing the line that their premium denim—with elaborate washes, hand distressing, perfect fits and expensive fabric—is the true premium denim and worth every penny of the price tag. “The difference between the premium players and non-premium players is that we use denim from the best mills out of Japan and Italy and manufacture in Los Angeles. We are the leader in the premium-denim space and don’t plan on changing our strategy,” wrote 7 For All Mankind President Topher Gaylord in an e-mail.

Michael Geller, president of Paige Premium Denim in Culver City, Calif., has seen the new jeans at the 1969 pop-up shop two doors away from the Paige Premium Denim store on Robertson Boulevard. He’s not impressed. “Frankly, it’s a $40 or $50 jean with a $10 advertising campaign,” Geller said. “It absolutely has no effect on us.”

Geller said his 5-year-old company’s jeans will continue to sell in the $150 to $225 category.

Other denim manufacturers believe Gap is a little late to the premium-denim game, following the example of others rather than taking the lead. “It is the classic massive battleship with the speedboat guys zipping around doing stuff,” said Drew Bernstein, chief executive of Kill City, a 3-year-old premium-denim label in Los Angeles and a division of 24-year-old Original Cult Inc. “Kill City has been doing inexpensive premium jeans since we started.”

Bernstein noted his jeans sell for $70 to $130. Fifty percent of the line is made in Los Angeles, and the other 50 percent is made in Mexico. They are made of top Japanese denim and washed in Los Angeles. “We are laughing at the Gap,” Bernstein said.

Boosting the bottom line

But the Gap isn’t laughing. It’s serious about the relaunch of the label that was originally designed by Adriano Goldschmied before it was shelved several years ago. The San Francisco company hopes the reconstituted label will boost revenues, which have been on a downward slope.

In 2004, revenues for the nation’s largest specialty-store chain, with more than 3,100 stores, totaled $16.2 billion but have fallen every single year, totaling only $14.5 billion in 2008. Same-store sales, too, have been in negative territory since fiscal 2005. Last year, Gap Inc.—which includes Gap, Banana Republic and Old Navy—saw comparable-store sales dip 12 percent. They were down 4 percent in 2007.

So it’s no wonder that Gap executives are taking an aggressive approach in promoting this label, whose ad slogan is “Born to Fit.”

“During August, customers responded well to our denim collections at Gap and Old Navy,” said Sabrina Simmons, Gap’s chief financial officer, in a statement.

Still, Gap North America saw its same-store sales drop 7 percent in August, compared with a negative 5 percent during the same month last year.

Yet, some analysts were optimistic about 1969’s future. “A denim destination is a good start to rebuild the overall business,” said Wedbush Morgan’s Chen. “It’s going back to its heritage.”