Levi’s – the market leader suffered a reduction of over 38% in its profits in the quarter March – May ‘12. Various reasons for this are being given are mainly economic impact of recession -loss of sales in Europe, impact of strong dollar . It is also the first time in 2 years that the sales of the company declined in Asia – a region which had been powering its growth. This would be particularly disturbing for the company since Asian countries are not really so bad in denim sales.
Taking the cue from the Levi’s situation and as an indication of the industry trend, shares of several denim makers like Guess, True Religion , Gap , V.F corp etc fell…
On the other hand we see some mid-sized brands doing well too.. Hudson Jeans , the California based brand is reported to be expecting a decent revenue of about $85 million this year with EBIDTA touching almost $15 million – a figure considered not so bad by the industry. Moreover , the company is exploring option of sale with valuations reported to be touching $150 million.
And another cool brand – J Brand from US touches a turnover of about $100 million and is , like Hudson Jeans, mulling a sale. Prospective buyers include The Jones Group, Li and Fung as well as Kellwood Co. . It is noteworthy that larger retailers do buy the smaller , well established brands , at whopping prices as VF bought 7 for all Mankind at $775 million. These sudden inclination to sell brands gives rise to speculation whether many of these brands feel that they have reached their peaks !
Anyway, on a positive note , some brands like Paper Denim & Cloth are considering the current time an opportune one and considering relaunch later this year . The brand had lost its way somewhere in 2006 when it used to be quite popular .