The designer jeans craze -- embracing such names as Gloria Vanderbilt, Sasson, Calvin Klein and Jordache -- is beginning to run out of steam. Business has softened. Stores are chopping prices. Some of the biggies are offering price breaks to retailers. And there's growing speculation that some players could go by the boards.
Sounds pretty grim doesn't it?
Not if you talk to the Nakash brothers, (Joe, Avi and Ralph). The three Israeli immigrants have become self-made millionaires in just 2 1/2 years by doing nothing but manufacturing jeans.
Their firm, a brash newcomer, is Jordache Inc., and business, they tell me, is booming.
Current sales (for the June 30 fiscal year) are streaking up at a rate of $120 million annually, way up from the $75 million sales the year before. (And that's up from $15 million). Pre-tax profit margins are running at a lofty 15 percent-plus. And the firm, which essentially hasn't taken on any new accounts in the past nine months because of lack of capacity, is sold out for all of 1980. Its first delivery date: February 1981.
In the face of these glowing numbers, a general merchandise manager of one of the biggest buying services -- representing a number of quality stores -- says the fashion end of the jeans business has definitely weakened. The folks at Levi Strauss, the world's largest jeans producer, say the same thing. The chief reason: the recession, plus the belief that many wardrobes are already chock full of enough designer jeans.
"I think these firms are going to have to hype like hell to keep the business form taking a drubbing," the merchandise manager said.
If nothing else, Jordache is surely doing that.
On Aug. 24, it will run the single largest apparel ad ever (21 pages at a cost of $500,000) in The New York Times Magazine. On top of this, it's negotiating to get a blimp (a la Goodyear) that would promote its products across the country for an entire year. The cost: $3 million. And it's also talking to one of the Big Three automakers -- it wouldn't say which one -- about an '81 model car that would promote the "Jordache look" in splashy styling featuring bold stripes on the side and a large Jordache horse-head logo on the hood. If it works out, the model will be in dealer showrooms in the spring.
Is Jordache doing this out of desperation? A last stab at retaining its growth?
The Nakash brothers, each of whom takes home $1 million a year in salary, insist it's none of these concerns.
"We're screamers," says Joe Nakash. "And when the economics are bad, we scream louder. We have no worries about our growth."
Scream it does, Jordache -- its nameconcocted from the names Joe, Ralph and Avi with "ache" added from Nakash to make it sound French -- is currently spending $1 million a month, about 10 percent of sales, on advertising.
About 90 percent of the frim's jeans are made in Hong Kong, the rest in the United States. The average pair of Jordach jeans, the brothers say, costs $11 to make, wholesales at $17.50 and sells in the stores at around $36. Men's and women's jeans each run about 40 percent of the business: children's, 20 percent.
The brothers put the designer jeans business at around $500 million a year, with roughly $400 million of it dominated by the big four -- Gloria Vanderbilt (the biggest), Sasson, Calvin Klein and themselves. And it's their feeling that only these four will survive the eventual shakeout because of growing competition and hefty operating costs.
Jordache President Russell Hartman, a former Macy's buyer who sat in on the interview, summed up the point. "It's like selling Ivory soap," he says; "you've just got to keep advertising."
Regardless of what happens to Jordache in the future, it stands out as one of the great rags-to-riches stories.
Joe Nakash came to New York in 1962 with $25 in his pocket and a single goal: to be a millionaire. He couldn't speak English (or even Yiddish), and in the beginning slept in the subway and railroad stations. He got a $40-and-seven-day-a-week job in Manhattan's Lower East Side. By 1966, he had saved enough money to bring his brothers to the United States. The trio saved at the rate of $150 a week and eventually opened their own jeans store. By 1977, they had three jeans units, one of which (in Brooklyn) was burned down by looters during the blackout that year. The Nakashs subsequently pooled their knowledge of the business and in March 1978 started Jordache.
What followed was a banaza as the designer jeans craze took off.
Accurate industrywide figures are virtually impossible to come by. But Levi Strauss says some of the fancy volume numbers quoted by the designer jeans people are exaggerated. "They just don't add up, based on our studies," says one official. A $500 million annual designer jeans business would represent about 8 percent of the overall industry volume (at retail) of over $6.5 billion. Levi Strauss says a 3-to-4 percent showing would be closer to the truth.
Merrill Lynch's Brenda Gall, one of Wall Street's top apparel specialists, says it's a safe bet designer jeans have peaked. The pipelines have been filled, more people are getting into the act, and maybe, she says, the people who wanted the newest and hottest already have had their fill.