Shop Talk

Job cuts at American Apparel: more than just meets the eye?

By Nivedita Bhattacharjee

American Apparel Inc, that hip clothier to urban youngsters which proudly advertises its “made in downtown LA” and “sweatshop free” policies, decided to dismiss about 1,500 of its factory workers last week as they could not submit proper immigration papers.   The Los Angeles-based company ran into trouble in June, when a federal probe found that about a third of its workers had supplied suspect or invalid records and were not authorized to work in the United States.  Then, last week, the company “let go” about 1,500 of them.   Though CEO Dov Charney, a Canadian immigrant, promises the dismissed workers “priority treatment, in terms of being interviewed for future positions with the company,” once the workers get their papers in order, and also said he’s disappointed by President Obama’s administration for having failed to bring up immigration reforms, some industry experts think there’s more to the mass dismissals than meets the eye.   “I want to give them the benefit of doubt and say, yes, those people don’t have the papers so they have to cut down on the jobs, but it’s almost too coincidental in my eyes to sit there and say, okay, all the growth of the new stores are cut, the inventory is up, and why is this happening this minute?” said Marshal Cohen, chief industry analyst at market research firm NPD Group.   In August, the company cut its sales forecast, and said it might also post a full-year loss.   “It’s all about speed-to-market for American Apparel, it’s about trying to get the products into the stores as fast as possible,” NPD’s Cohen said. He added that with so many workers out there would be a change in dynamics for the company, but he said production should not be hampered much, as the company needs to cut back on that anyway, as sales slow down.   “This is one unusual retailer, in that they are so tied to production to sales. So, the minute sales start to feel the pain, they got to instantly turn the faucet off, else they’ll flood the sink!”   American Apparel did not respond to an email asking for their take on Cohen’s view.

Last week, Charney wrote a farewell letter to employees and posted it on his site in English and Spanish.

(Reuters photo)

Watches and sunglasses – shopping’s bright spots

By Dhanya Skariachan

There’s nothing like a snazzy watch or a cool pair of sunglasses to  chase away those recession blues.   Despite the economic downturn, the U.S. accessories market has displayed some areas of growth, according to a report from market research firm NPD Group, with  watches and sunglasses being bright spots.

That could point to a trend where shoppers are not buying whole outfits, as they try to save money, but are drawn by powerful SALE signs to selectively snap up accessories to accentuate their old wardrobes. 

According to the NPD report, sales of men’s watches grew 20.8 percent in the fourth quarter of 2008 compared to a year ago, in stark contrast to the total accessories market, which saw a 26-percent decline.   “Watches continue to be seen as an investment purchase, at least by men,” said Marshal Cohen, an expert on consumer behavior and analyst with market research firm NPD Group.   While sales of watches to men of the 25-34 age group grew 1.9 percent, sales to the 35-54 years age group rose 8.5 percent.   Sunglasses have been the beneficiary of impulse purchasing, Cohen said, adding that NPD data shows nearly a third of sunglasses purchases were unplanned.  The top place for sunglasses’ sales was department stores. Sales of sunglasses rose 16.8 percent in that channel in the fourth quarter of 2008, according to the report.   “Even in a tough market, department stores ramped up their sunglasses assortment and put them front and center, and that really paid,” said Cohen.   Items like these may be indicators to, well, keep an eye on.   “Accessories was one of the last categories to post growth before this downturn and will likely be one of the first to return,” Cohen said.   (Photo/ Reuters)

Check Out Line: More consumers see U.S. in recession

Check out darkening consumer sentiment in the month of May.

According to the latest results of NPD’s Fast Checks Study: Consumers Speak Out On the U.S. Economy, in May, 58 percent of consumers said we are in a recession, up from 55 percent in April.

Respondents to the survey said they are planning to spend less on items like apparel and footwear. With vacation season getting underway, 49 percent of consumers said they plan to cut back on leisure travel. 

A greater percentage of consumers also said they are spending less because they need to put money toward essentials, such as gas and utilities.

“Consumers are finally starting to react to the price of gas and other rising costs and are shifting shopping intentions.” according to NPD’s Marshal Cohen.

“Overall, in the past month, a 5 percentage point increase was seen in survey respondents who tell us they are going to do something different by taking advantage of promotions/events such as store sales, coupons, and discount or membership programs.”

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