The Breakdown

Explaining Southern California's economy

Joe's Jeans, other Southern California designer jeans companies thrive despite slow economy

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Despite a sluggish economy, designer jeans haven’t gone out of fashion. And that’s a great fit – and profit – for Southern California jeans makers.

At Commerce-based Joe's Jeans, sales grew 25 percent in its last fiscal year to nearly $119 million. The store sells jeans at $120 or more at its boutiques and provides jeans to high-end department stores.

Joe's Jeans CEO Marc Crossman said the average female shopper buys about a pair of jeans a month. That's compared to the past, when shoppers would buy six or seven pairs a year.

"There's always a new reason for a girl to come into the store and update her closet," Crossman said.

As a result, Joe's Jeans plans to grow its 31 stores to 100 locations in the next four years. 

But why would anyone spend more than $100 on a pair of jeans? Analysts say consumers are willing to pay more for a better fit and style.

"Premium denim is almost like being able to go to the gym, without having to go to the gym," said Marshal Cohen, chief industry analyst with The NPD Group. "Being able to invest in product that make them look and feel better, it makes it a worthwhile investment."

Jeans have evolved from what used to be part of a workers’ uniform to trendy office wear. Companies like Joe’s Jeans, tout the workmanship they put into their jeans and their ability to fit many different types of bodies, whether curvy or slim. 
Joe's Jeans said it can take about a year to bring a jeans concept all the way to the market. Part of that process happens at a Lynwood, Calif. facility, where the product is taken from raw denim pants to vintage jeans.

Inside a small white room, workers hoist denim jeans onto balloons that fill in the pant legs. Then, they scrape sandpaper on the jeans to make "whiskers."

“Whiskers are pretty much the lines that develop around your hip area, as you’re sitting and you’re bending," said Gary You, a product developer for Joe's Jeans. "As he’s scraping it off with sandpaper, it becomes lighter because we’re scraping the actual indigo off the fibers.” 

Raw denim is stiff. It can take years to wear down the fabric so it contours to the body.
Joe’s Jeans fast-tracks that process by using detergent, pumice stones and a chemical spray to get that vintage “look.” Workers also use tools to fray the edges and cut holes in the jeans.
“A lot of my friends always ask me: ‘Do they really cost that much?’ And they actually do because of the time spent on the pair of jeans," You said.

But this process – which happens in Southern California and Mexico – only represents a portion of the overall cost for the $120 pair of jeans.

"Our denim raw material cost ranges anywhere per garment from $8 to $12," You said. "Processing in L.A., (costs) anywhere to $15 to another $25 or $30."

Other factors, including marketing and logistics also add to the final cost, You said. 

Cost of designer jeans driven by consumers
Anthony Dukes, who teaches marketing at USC, said demand also drives up the price.

“If it’s low priced, then many people can buy it. If it’s high-priced then I know I’ll be the only one or one of the few people that will be having it," Dukes said.

But not everyone can afford those jeans. That’s the message Paul Marciano, the CEO of designer brand Guess, got from its customers.

“The customer's message is now 'I love your product, but I would like that but also I would also like you to carry some [jeans] which I can afford myself,'" Marciano told investors after a recent earnings report. "The message was loud and clear."

Marciano said Guess will sell more lower-price jeans at around $80 to $100.

Sales at Guess aren't growing at a robust pace like Joe's Jeans. Revenues increased 5 percent to $815 million in the fourth quarter, compared to a year ago. The clothing company's fourth quarter earnings were $72.6 million, down 24 percent. A Guess spokeswoman did not return calls for comment.

But for other Southern California jeans companies, like Joe's Jeans and True Religion, sales continue to grow in the double-digit percentages.

Retail analyst Marshal Cohen with the NPD Group said high-end jeans are one of the sectors of the fashion industry to come out of the recession quickly.

Sales of jeans in the U.S. that cost $75 or more increased 17 percent to $1.4 billion for the year ending in February 2013, compared to the same period a year earlier, NPD Group said.

Even though high-end jeans only represent 8 percent of all jeans sold in the U.S., it's a big influence in the fashion industry, Cohen said. 
“While it’s not the biggest piece of the pie by any means, it does make the biggest splash,” Cohen said.

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