Industry Surveys

Both H&M and Inditex are enjoying success.
For the year ended November 30, 2006,
H&M’s sales rose 12% to 68.4 billion
Swedish krona (US$9.17 billion). Sales at
Inditex, which operates under eight banners,
including Zara, Oysho, Pull and Bear, rose
22% to €8.2 billion (US$10.4 billion) the
year ended January 31, 2007. (Note: All currency
conversions in this Survey are at average
exchange rates for the period in question,
except where noted.)
US-based apparel retailers and manufacturers
are wooing designers to produce merchandise
at the low end. Discounter Target
has featured lines by designers Isaac Mizrahi,
Liz Lange, and Mossimo Giannulli. In April
2007, Gap introduced Gap Design Editions,
selecting three up-and-coming design labels
to produce their versions of a woman’s iconic
white shirt.
Steve & Barry’s LLC, a clothing chain
known for selling T-shirts, sweatshirts, jeans,
and other basics — often for less than $10
an item — signed actress Sarah Jessica
Parker to help design a line of fashionable
women’s clothing. Called Bitten, every piece
in the collection will sell for $19.98 or less,
according to press reports. Parker, known for
her sense of style, said that she picked the
chain because she grew up in a family of
eight children that faced financial difficulties.
The chain is hoping to build upon the success
it has enjoyed with its $14.98 Starbury
basketball sneakers, endorsed by New York
Knicks basketball player Stephon Marbury,
who wears them during games. Steve &
Barry’s has since expanded its product line
from 50 items to 200, including apparel and
women’s athletic shoes.
Offshore sourcing
In the ongoing push to cut expenses, US
apparel and footwear manufacturers increasingly
have moved their production facilities
to lower-cost regions outside the United
States — notably Mexico, the Caribbean,
Central America, Asia, and sub-Saharan
Africa. Many manufacturers, though, have
retained some facilities in the United States
to manufacture products that require a fast
turnaround time.
Following the 1995 implementation of the
North American Free Trade Agreement
(NAFTA) and the subsequent lowering of
tariffs, apparel manufacturing in Mexico and
the Caribbean grew significantly. The proximity
of these countries to the United States
means that their facilities can offer significantly
shorter shipping times compared with
Asian manufacturers, while also providing
low-cost production — factors that are especially
important for basic goods.
Legislation in the last several years has sustained
the long-term shift to offshore sourcing.
The Trade Act of 2002 was approved by
the US Congress in July 2002 and signed into
law by President George W. Bush. This legislation
contains the Trade Promotion Authority,
which grants the president the right to negotiate
trade agreements and gives Congress the
final authority to approve or disapprove those
agreements. It also contains the Andean
Trade Preference Act, which provides dutyfree
access to most apparel, and virtually all
footwear, from the Andean region of South
America (Bolivia, Colombia, Ecuador, and
Peru). The new legislation made certain
retroactive modifications to the May 2000
Caribbean Basin Trade Partnership Act and
the African Growth and Opportunity Act
(AGOA), both of which carry numerous
breaks for footwear and apparel from countries
in those regions.
Standard & Poor’s believes that, while
tariff and quota preferences for apparel and
footwear produced in the Caribbean basin,
the Andean region, and, to a lesser extent,
sub-Saharan Africa have temporarily increased
sourcing from these regions, the
trend is not likely to last. Over time, we expect
China’s share of apparel and global
manufacturing to increase dramatically, facilitated
by its entry into the World Trade Or-
US IMPORTS AND EXPORTS OF APPAREL
(In billions of dollars)
80
70
60
50
40
30
20
10
Exports
Imports
0
1990 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 2006
Source: US Department of Commerce.
NOVEMBER 29, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY
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