Mid-market menswear chains are trying to differentiate themselves from their rivals as customers seek investment pieces in the economic downturn.
Received retail wisdom is that in an economic downturn, menswear is the first clothing sector to suffer, as disposable income is diverted away from the more discretionary spend of fashion.
Although most menswear operators with any level of experience will have a strategy to deal with such an event, the effects of the credit crunch are playing a significant part in the changes that the middle-market menswear sector in particular is going through.
High street menswear specialists such as Moss Bros and Suits You, whose stores would have been many male shoppers’ first port of call a few years ago, have suffered tough trading in the past couple of years.
Moss Bros issued a profit warning at the beginning of the year, while private equity firm Gresham failed to turn Speciality Retail Group, which owns the Suits You chain, which is Moss Bros’s main rival.
Marks & Spencer is a recent high-profile victim of the downturn, but its resurgence prior to this, including improvements in its menswear offer, has hit competitors.
One menswear boss says: “There is a state of flux in the market and we will have to deal with it. Trading generally is pretty tough although this season formalwear has been better than casualwear. It’s surprising and I’m not sure why. Maybe men are dressing up in a downturn.”
In the deflationary environment that has characterised the high street over recent years, shoppers have got used to trading down for price, or up for quality and brand kudos.
One menswear operator says: “Part of the reason some of the specialist menswear chains are struggling is that there’s a polarisation. Tesco and Asda are nibbling at the lower-priced end. M&S is doing a good job and has reduced its prices, plus it has nicer stores and sexier advertising.
Moss Bros will not have been helped by the saga of a potential bid from Icelandic investor Baugur earlier this year, which eventually failed. The group has been unable to make any long-term strategic decisions. Now, with the shadow of that bid removed, it is hoping to refocus its offer.
“The question is what do Moss Bros and Suits You stand for now and how will they differentiate themselves,” says one menswear retailer. “They will have to move a little upmarket – there isn’t really anywhere else they can go.”
Moss Bros has in fact been edging its way towards a slightly more premium offer, away from the £150 suit mark towards the £200-plus market. Adding more fashion-oriented brands such as French Connection and CK by Calvin Klein has also been a focus – the group’s branded fashion chains Cecil Gee and Hugo Boss have been trading better than the mainstream Moss chain. The company has also been investing in its stores and is continuing its refurbishment programme, which has seen its under-invested portfolio given a glossier, more contemporary look.
Even so, some operators question whether it is too little too late. One menswear boss says: “I don’t know what Moss Bros is going to do in the long term. If you’re moving more upmarket you have to have the stores to go with it and it hasn’t really made a big enough step change with its new-look Moss shops.”
Another says: “It’s much easier to move down than up, and there’s danger in trying to build profits without investing in the business. If you want to persuade men to buy sexier or more fashionable clothing then you have to invest in the stores.
“Putting SRG together with Moss seemed to be the thing to do, but I suspect there was too much overlap in terms of stores.”
SRG was snapped up by Egypt-based Arafa Holding, a major supplier to the UK high street as well as a major shareholder in UK brand house BMB Group. Arafa chairman and BMB chief executive Peter Lucas has plans for Suits You, including a shift upmarket, and with Arafa’s backing he is well placed to put the plans into action.
Lucas says: “A lot of menswear retailers are similar, with no major point of difference. You just need to differentiate yourself from the competition but without losing the customer base. We want to move away from middle market towards quality brands and a quality environment. ”
It is not only the retail side of the sector where changes are occurring. Suppliers are inevitably being squeezed by retailers as the trading climate gets tougher.
Menswear is a relatively small world so competition for distribution and concession deals can be intense. As chains and department store businesses are put under more pressure, they will be keeping a keen eye on whether any current concession partner does in fact offer the best value for money. Menswear suppliers and manufacturers have been rethinking their positioning and becoming more acquisitive as a result.
BMB Group is finalising a deal to add Pierre Cardin formalwear to its books, where it would join a brand portfolio boosted by the acquisition of menswear supplier Crowther’s stable of brands in March. As well as running menswear departments in Debenhams and Burton, the firm has steadily expanded its branded portfolio.
Lucas says: “We’re acquiring brands and licences such as Haines & Bonner, Piscador and Ben Sherman which are at the top end of the middle market. We have Gibson for a more fashion-oriented attitude and for something more classic we have brands such as Alexandre Savile Row.
One menswear brand boss says: “The breadth of brands mean that it has products for all ends of the market. If there are 600 menswear shops in the UK, BMB has got something it can sell to all of them.”
Supplier Berwin & Berwin, which makes suits for Next and Ted Baker, as well as a host of its own brands, was involved in the purchase of shares in Moss Bros via a trust last month. This move is likely to have been to protect its concession business with House of Fraser – whose owner, Baugur, would almost certainly have decided it made more sense to have the department store’s concessions run by Moss Bros in the event that it bought the group. Having a stake will give Berwin & Berwin at least some leverage with Moss Bros and Baugur, which also has a stake in Moss Bros.
Marks & Spencer has the biggest menswear market share, followed by Next, Debenhams and Burton. House of Fraser and John Lewis has about 50 and 26 stores respectively. With relatively few players in the market, losing any of these retailers as an own-label client can leave a serious hole in a supplier’s business.
Adam Creasey, menswear trading director at department store group Debenhams, says he is pleased with the menswear performance given the economic climate, and aims to make more improvements.
“We just look at the market share which has been increasing,” he says. “We’re concentrating on better product, less duplication across the ranges, better presentation, and prices are a bit sharper. We’ve also got a good breadth of offer. The different brands appeal to all ages and levels of fashionability.”
Classic retailer Austin Reed saw EBITDA increase by 31% to £8.8 million for the 12 months ended January 31, thanks to improved gross margins and better product ranges. UK sales rose to £110m against £108m the previous year, equating to a like-for-like rise of 0.8% for the 12-month period.
The company last week said it should not be impacted by problems at investment firm Dawnay Day, whose bosses hold a stake in the menswear chain.
Chief executive Nick Hollingworth said the slightly more upmarket positioning – suits will start at about £199 rather than £150 – has given the business some differentiation from its more middle-market competitors.
The company, which has signed Spooks actor Rupert Penry-Jones as the face of the brand, has been broadening its offer. The addition of more premium product, including its Signature range, has continued quietly over the past two years and now makes up 20% of the offer. The chain has also introduced the Red range, aimed at a younger, more fashion-oriented customer.
Hollingworth says: “You can’t just have middle-market product with middle-market pricing. People want newness, especially in menswear – it’s all about detail, in the products and the shops. You’ve got to create a reason to shop with you.”