California Apparel News

When Los Angeles fashion designer Sheri Bodell finished tabulating her Spring ’08 orders at the recent Fashion Coterie trade show in New York, she noticed a major geographic shift in buyers.

About 50 percent of the stores interested in her rock ’n’ roll–inspired collection were in Europe.

That was a major bump up from past shows, when European stores traditionally accounted for only 20 percent of sales of her edgy, high-end dresses, pants and tops.

Bodell’s popularity in Europe is being fanned by the weak U.S. dollar, whose value vis aacute; vis other major foreign currencies has been skidding downhill for several years.

A weak dollar is making apparel created and manufactured in the United States a top-notch bargain for overseas buyers, who now can buy piles of clothing on the same budget.

“They can afford it,” Bodell says of the Europeans, who aren’t taken aback by her wholesale prices, which range from $148 for a camisole to $898 for a long, beaded gown. “No one bats a lash at our prices.”

That’s because in 2002, nearly one U.S. dollar bought one euro. Most recently, it took $1.43 to purchase that same euro. That 43 percent slide in the dollar’s value has transformed overseas consumers into shoppers gone wild. The same holds true for the Canadian dollar. In 2005, one U.S. dollar translated into $1.58 Canadian dollars. Now, one U.S. dollar translates into 97 Canadian cents, nearly a 40 percent decline in value.

As a result, exporters of all kinds across the United States are reaping major benefits. In August, U.S. exports jumped a robust 12.8 percent, compared with one year ago, while imports inched up only 3 percent.

While retail sales in the United States are stuck in the mud, foreign sales keep blossoming.

Levi Strauss & Co., the $4.1 billion blue-jeans giant based in San Francisco, noted that overseas sales kept its economic boat afloat during the third quarter of this year.

Levi’s, in its third-quarter earnings report, said U.S. sales for its pants and other clothing, particularly its Signature and Dockers labels, were disappointing. But blue-jeans sales took off in Europe and Asia, aided by better exchange rates.

Net revenues for the third quarter totaled $1.051 billion, up 2 percent from last year’s $1.028 billion for the same period.

“If it were not for the benefit of foreign currency, revenues would have been flat,” said Levi’s spokesperson Jeff Beckman.

Helping the middleman

The weak dollar, however, doesn’t always translate into lower prices for foreign shoppers flipping through clothing at their local department store.

Many of the people riding the currency wave are overseas distributors who buy large quantities of clothing from U.S. manufacturers and then resell them to stores in their native country.

That has been the experience for J Brand, a young fashion-forward brand of premium jeans started in late 2005 in Los Angeles. Jeff Rudes, the company’s president and chief executive, said his distributors are the ones benefiting from a fluctuation in exchange rates.

“Overall, I don’t see there being a reduction of price [of our jeans overseas],” he said, noting the retail price of his jeans varies from $158 to $250. “What is happening is our distributors are stepping out and buying deeper. They are willing to have their inventory levels higher than normal. They are taking a little more risk because they have the cushion to do so.”

With higher margins, he said, his distributors have more money to advertise and promote his blue jeans, which are made in Los Angeles and are expected to help his company reach $30 million in revenues this year and $40 million next year.

For designer Galina Sobolev, business in Britain has quadrupled in the last year and grown threefold in Europe for her Single label of dresses, sportswear and other highend garb. Now, England and other countries in Europe are major spots on her retail map, accounting for 25 percent of sales.

Again, buyers aren’t balking at her wholesale prices of $138 to $152.

Local retailers selling to international tourists make up one market sector that is really going to town with the currency swing.

The stores on Robertson Boulevard, one of the trendy shopping areas in Los Angeles, have been inundated with foreigners bent on catching a glimpse of a movie star while snagging a few pieces of clothing.

“It’s been really noticeable since the beginning of the summer,” said Alison Muh, president of Surly Girl, a 2-year-old accessories shop on Robertson Boulevard.

She calculates her store sales are up 10 percent to 15 percent over last year.

“They are spending a lot more,” she said, “and they even comment about how they are spending more on things because it is relatively cheap for them.”

Two-way street

One drawback to the weak dollar, however, is that the price of fabric and other raw materials coming from Europe and Japan, where the yen is relatively strong against the dollar, is chipping away at profit margins for U.S. apparel makers.

“If you source domestically, you are probably feeling pretty good about it,” said Jeffrey van Sinderen, an analyst with Los Angeles–based B. Riley & Co. who watches several publicly traded companies, including Pacific Sunwear, Bebe, Quiksilver, Hot Topic, Wet Seal and Charlotte Russe. “If you’re sourcing product from Italy, you are going to pay a fortune for it.”

Indeed, Sobolev has seen silk prices rise 30 percent in recent months. And fabric that was selling for $9 to $9.50 a yard is now costing as much as $11.50 a yard. “The fact that our volume has increased is making up for the difference,” she said.

She is also adjusting her styles by creating closer-fitting garments and shorter skirts that use less fabric.