The intimates industry watched its fortunes sag in 2011. Sales fell while rising cotton costs and increased competition hurt the bottom line for many underwear manufacturers and retailers.
[AAYi Fashion][AAYi Fashion]¡°It was a down year,¡± said Scott Krasik, a retail analyst at BB&T Capital Markets who covers companies such as Hanesbrands Inc. and Maidenform Brands Inc. ¡°Retailers for the most part had negative same-store sales in intimate apparel.¡±
[AAYi Fashion][AAYi Fashion]The larger manufacturing firms have been especially hard hit as newcomers like Urban Outfitters and Alexander Wang encroach on their turf. New Jersey-based Maidenform's share price has fallen 40% in the past six months to about $18, and recently suffered a 52-week low after reporting a third-quarter net income of $10.2 million, a 20% drop from 2010.
[AAYi Fashion][AAYi Fashion]Getting pinched
[AAYi Fashion]North Carolina-based Hanesbrands, which sells at stores including Kohl's, has seen its stock price drop by a quarter since the beginning of July, and now trades near $22. Net sales for the most recent quarter, ending Oct. 1, were virtually flat over the same period a year earlier, at $1.2 billion. By comparison, the S&P Retail Index has fallen only 2% in the same period.
[AAYi Fashion]Even local lingerie shops like Pink Slip, a 12-year-old innerwear boutique located at Grand Central Terminal, are getting squeezed. Though the business is still operating its 780-square-foot shop, owner Margo Andros recently filed for Chapter 11 protection. She said sales for last year were flat compared with 2010, which she attributes to both a lackluster shopping year and several store floods that damaged inventory. Such factors, combined with a hefty $16,000 a month in rent, led to the filing.
¡°Traffic is down,¡± said Ms. Andros. ¡°Christmas wasn't 'wow'¡ªwe didn't have our big spenders.¡±
Undergarments have traditionally been considered recession-proof¡ªa necessary product worn by all shapes and sizes that became hip through racy ad campaigns from the likes of Calvin Klein and Victoria's Secret. But the field has become overcrowded as more and more players, from ready-to-wear designers to mass-market retailers, dabble in their own lines. At the twice-annual Curve intimates expo, 960 brands exhibited last year, a 9% rise over 2010.
Larger chain stores, such as Urban Outfitters' Anthropologie and Free People divisions, as well as Shopbop, an e-commerce site, have also introduced intimates lines. Many of these divisions are more budget-friendly than their department-store counterparts or the high-end wares at small lingerie boutiques.
¡°Not only are you seeing the ready-to-wear designers design some of these pieces into their collection, but you're also seeing some of the major retailers carry their own,¡± said Danielle Black, who co-founded the lifestyle and lingerie site ILoveAGood.com in September.
New entrants
Along with Mr. Wang, Phillip Lim and Stella McCartney have introduced innerwear lines in recent years. In November, supermodel Bar Refaeli launched her own underwear collection as well.
Lured by a famous fashion name, consumers wishing to purchase undergarments might just shop on the contemporary-apparel floor of a department store, closer to the entrance, rather than bother to travel up to the lingerie level, experts say.
¡°A name is so important today,¡± said Roseanne Morrison, fashion director at retail consulting firm The Doneger Group. ¡°It'll garner a lot of attention.¡±
Another challenge for stand-alone undergarment manufacturers: They must keep up with the latest figure-flattering, bosom-boosting styles that require costly new materials. Bonded fabrics, which offer a seamless look for wearers to avoid visible panty lines, are one such expense, and if a smaller firm has limited distribution, the price goes up even higher.
¡°This presents a big challenge for companies that have been doing things for a long time,¡± said Ms. Morrison. ¡°Everybody wants to look like Adriana Lima¡ªit's a tall order to fill.¡±
Not all firms are reporting droopy underwear sales. Thanks to affordable items such as fragrances and the attention generated by its popular televised fashion show, Victoria's Secret, owned by Columbus, Ohio-based Limited Brands, cited an 11% same-store sales rise in December.
And New York-based Hanky Panky, a 35-year-old company, saw same-store sales rise by double digits last year, as shoppers scooped up its signature lace thong. To attract even more consumers, the company is relying on its collegiate collections and a new Hello Kitty line due out this spring. The shop feels confident enough to raise prices in 2012. Gale Epstein, Hanky Panky's creative director and co-owner, said the rise in cost of raw materials is forcing her hand.
¡°We could not resist any longer,¡± said Ms. Epstein, who plans to raise the price of thongs by 10%, to $20, this year.
