Furiously Fast Fashions

Industry Standard, The, June 11, 2001 by Joanne Lee-Young, Megan Barnett

IN THEORY, SPEED SHOULD BE GOOD FOR business. The great promise of fast cycles and last-minute changes is clear: increased sales and fewer markdowns. If a retailer figures out what customers want and gets it to them quickly, revenues should be strong.

Speed can lead to mistakes, however. For one thing, it's hard enough divining what fickle consumers will buy four times a year. But planning a dozen inventory cycles in as many months can befuddle even the most seasoned buyers. The bottom line: Retailers can end up with just as much excess inventory as in the old days, if not more. "If the window of opportunity is smaller, then the level of accuracy you need is higher," says Rafiq of Levi's. "With fresh inventory constantly breathing down, items that don't sell appear passe sooner and have to go on sale or be marked down more often."

Consider the disappointing firstquarter results at Express. Sales inched up 1 percent while gross margin and profits fell. Some of the blame goes to the skittish economy, but executives admit most of the problems stemmed from bad decisions made under the pressure of ever-faster fashion cycles. "We did have merchandise and assortment issues" says Michael Weiss, CEO of Express. "We decreased levels of inventory in skirts and shorts in favor of other merchandise, categories which in hindsight did not generate enough additional volume." Weiss added Express also had "fashion errors with some sweater assortments" that contributed to the poor performance. As a result, the retailer is taking aggressive markdowns to clear inventory.

Still, Express is confident about the coming line. The retailer expects its back-to-school wear -- particularly its denim assortments - will be what customers want. To boost sales, Express will also roll out an advertising campaign in the fall issues of 11 of the top fashion magazines, its first such campaign since 1993.

Yet, at a time of last-minute changes, executives aren't betting too heavily on anything. "We are planning to be very flexible on our inventory," says Limited CFO Ann Hailey. "We are less than 30 percent committed in the fourth quarter, so we can either not place orders or we can go after inventory as we see it turn." They've got speed on their side. But that may not be enough.