California Apparel News

Since the beginning of 2015, Mike McGinley’s European retail partners have been telling him that they cannot afford his West Hollywood, Calif.–based LASC line of men’s activewear and swimwear—after years of selling LASC at their shops.

McGinley has received no complaints about the line’s quality or not being on trend. It’s the macro economy. The dollar is strong and other currencies such as the euro and the British pound are weak. People overseas are cutting back on their purchase of U.S. goods. The currency market has been forcing McGinley and other California fashion entrepreneurs to change their business strategies.

Before 2013, overseas business made up 35 percent of LASC’s wholesale business. This year, the number has dropped to 10 percent, said McGinley, president of LASC’s wholesale business. Another division of LASC also serves as a multi-brand fashion boutique.

“This is the first time that is has become a major issue,” McGinley said of how the dollar’s value has impacted business in his three decades of running LASC.

In the past, he has given foreign buyers a 10 percent discount to help balance some costs of shipping and tariffs on American goods. But in the past year, many of his overseas retail partners have requested discounts larger than he could afford. So McGinley has been scouting for more domestic business.

“It’s the new normal until the dollar starts sinking,” McGinley said.

It may not happen for a while. A Goldman Sachs forecast released in mid-March said the euro will decline until it reaches the same value as the dollar this fall. The forecast also predicted that the euro will drop to record lows against the dollar in the next couple of years. In a recent forecast, Barclays Capital, which also offers currency analysis, forecast that the euro and the dollar will reach parity by the end of the year. Currency news site Pound Sterling Live (www.poundsterlinglive.com) quoted forecasts from some other high-profile currency analysts such as HSBC and Morgan Stanley, which forecast the British pound will continue to decline against the U.S. dollar.

The dollar’s gain has helped to boost consumer confidence in the U.S., according to a statement released March 31 by the Conference Board, a business research group. American consumer confidence had been declining in February.

It has been a boon for American fashion consumers looking for clothing made with European fabrics, said Galina Sobolev, designer and owner of Los Angeles–based dress company Single. Dresses made out of high-end fabrics that may have been out of their reach are now affordable. A silk kimono dress by Single wholesaled for $140 in the past. But with the stronger dollar, the dress has wholesaled for $98.

Overseas business has not completely disappeared. LASC’s McGinley said that he receives overseas orders from his website (www.shoplasc.com). The overseas consumers purchase LASC’s athleticwear and swimwear at the same prices that American consumers do. However, they also have to pay for international shipping and taxes.

Venius Adams makes turbans, leggings and head wraps for her Los Angeles–based line, Venius. She estimates that 25 percent of her business is based in Europe. While her overseas business has declined, many of her overseas customers, including many yoga studios, want to continue doing business with her. But they are looking for ways to avoid shipping costs. For some of them, it is cheaper to travel to the U.S., pick up goods stateside and return to their homes without paying for shipping.

“They are looking for anything that will save them money,” said Adams, creative director and designer for the Venius brand.

International Checkout is a shipping company based in Los Angeles’ Van Nuys neighborhood. It handles some direct sales/international shipping for companies such as Kitson, Bebe and James Perse. Due to the strong dollar, the company’s volume of shipments has declined an estimated 15 percent in March compared with the previous year, said Kathy Beteta, executive vice president of International Checkout. “What we’re losing is the lower-ticket items,” Beteta said. “Luxury shoppers have not been impacted. We seem to be retaining the business we most want to keep.”