Shifts at Fashion Firms Create Results

PVH Corp., Xcel Brands and Oxford Industries demonstrate how their current models are pushing them forward in the difficult apparel industry.

NORTH AMERICA–Following a week of new deals, partnerships and reveals at the fashion trade show MAGIC, FBR Capital Markets reports that while investors may believe the apparel world is “somewhat permanently scarred,” winning models from companies like PVH Corp., Xcel Brands and Oxford Industries remain intact.

PVH Corp.

During MAGIC, PVH Corp., the world’s No. 3 largest licensor with $18 billion in licensed retail sales in 2016, according to License Global’s Top 150 Global Licensors report, highlighted the potential of its Calvin Klein Jeans division in the difficult apparel environment. According to FBR, the denim division continues to “satisfy both core and new partners.”  For example, the Calvin Klein Jeans management team believes that its spring 2018 collection will allow the rollout of higher-priced items to retailers who are not core buyers, including Nordstrom and Bloomingdales, as well as will have more opportunity to elevate its status among core partners like Macy’s. In addition, Amazon remains a key partner for Calvin Klein Jeans, which sells directly to the e-commerce giant.

PVH Corp. is set to release its Q2 earnings later this month.

Xcel Brands

FBR also reports that Xcel Brands is starting to gain even more traction in the retail environment with brands like Halston, C. Wonder and Isaac Mizrahi. According to the capital markets firm, the initial shipments of Halston merchandise to Dillard’s retail locations have been positive and should offer material operating leverage opportunities. Additionally, FBR believes that, longer term, there could be additional door, brand and category extensions in store for the Dillard’s relationship.

Furthermore, Xcel’s relationship with QVC for its core brands remains strong and currently posts more opportunities for additional holiday offerings and categories. Longer term, FBR believes that the HSN/QVC merger will create the potential for Xcel to begin a relationship with HSN as well as help lift the network.

Additionally, Xcel Brands’ total net revenues for the second quarter of 2017 were $8.4 million, down approximately 8 percent from $9.1 million in the prior year quarter. However, this was attributable to lower revenue associated with the C. Wonder brand, which has been transitioning away from QVC, as well as from the exiting of the LCNY license agreement in July. However, these were partially offset by higher revenues from the company’s wholesale and department store businesses, where Xcel has increased the number of stores its brands are sold in.

Oxford Industries

Oxford Industries, which is known for its lifestyle brands Tommy Bahama, Lilly Pulitzer and Southern Tide, is also making shifts to navigate the altering apparel industry, according to FBR. For example, Tommy Bahama is set to ship its first dedicated women’s activewear line this October, with further shipments planned for spring and summer 2018. However, the Tommy Bahama women’s segment on a whole is on the rise, with Oxford Industries adding shipments and SKUs for branded-swimwear and dresses.

Oxford Industries will release its Q2 results near the end of August. However, FBR states that due to the company’s strong slate of lifestyle brands and recent shifts to a more robust level of operations and more realistic marketing plan, the company is expected to register solid results.

Overall, FBR found that Amazon, for brands with a strong customer base and differentiated product, is not a major negative in the apparel space. According to the firm, Amazon is almost “universally not a price-cut leader”; is a major buyer early in the season; does not materially affect margins; and the brand is not aggressive in demanding exclusives or picking fashion shifts. Additionally, for companies that understand how Amazon’s algorithms work, there is an opportunity to be highly rated in key categories.

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