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Industry Surveys
Apparel & Footwear

May 24, 2007

CURRENT ENVIRONMENT..................................................................1
Sales rising as consumers dress up
Marie Driscoll, CFA Clothing makers adapt to face challenges
Apparel & Footwear Luxury, value goods both do well
Analyst Economic growth spurs consumer spending
S&P Ratings Services View:
Jeannine DeFoe Outlook mixed
Financial Writer INDUSTRY PROFILE...............................................................................6
The industry that suits everyone
Apparel
Footwear
INDUSTRY TRENDS ..................................................................................7
Private equity firms go shopping in the apparel sector
Diversifying to survive
Buying into new markets
Following the demographics
Licensing builds megabrands
Shorter cycles
Contacts:
Price deflation
Offshore sourcing
Inquiries & HOW THE INDUSTRY OPERATES ..............................................................14
Client Support Components of the industries
800.523.4534 Intense competition
clientsupport@ Manufacturing dynamics
standardandpoors.com Reduced trade regulation
Vital role of technology
Sales Sales channels proliferate
800.221.5277 Enhancing customer loyalty
roger_walsh@ KEY INDUSTRY RATIOS AND STATISTICS ...................................................21
HOW TO ANALYZE AN APPAREL OR FOOTWEAR COMPANY ........................22
standardandpoors.com
Qualitative factors
Quantitative factors
Media Other factors
Michael Privitera S&P Ratings Services View:
212.438.6679 Evaluating an apparel company’s creditworthiness
michael_privitera@
standardandpoors.com
GLOSSARY .............................................................................................29
INDUSTRY REFERENCES.....................................................................31
Replacement copies
COMPARATIVE COMPANY ANALYSIS ..............................................34
800.852.1641
THIS ISSUE REPLACES THE ONE DATED NOVEMBER 23, 2006.
THE NEXT UPDATE OF THIS SURVEY IS SCHEDULED FOR NOVEMBER 2007.
apf_0507.qxp 5/14/2007 1:07 PM Page ii

Standard & Poor’s Industry Surveys

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VOLUME 175, NO. 21, SECTION 2

THIS ISSUE OF INDUSTRY SURVEYS INCLUDES 2 SECTIONS.
apf_0507.qxp 5/14/2007 1:07 PM Page 1
C URRENT E NVIRONMENT
Sales rising as consumers dress up
Sales of both apparel and footwear in the US
are rising, lifted by a move toward dressier,
more colorful looks for both men and women.
Suit sales are rising for men and dresses are
growing more popular for women. And sales
of accessories such as handbags remain strong.
Retail sales of apparel rose 5% in 2006, com-
pared with a 4% increase in each of the past
three years, according to research group NPD
Fashionworld’s consumer estimated data.
The growth is not occuring evenly, how-
ever. Consumers are increasingly splitting
their purchases between luxury goods and
value-priced merchandise. The high-end
consumer is more insulated from higher
energy prices and other economic swings.
At the same time, inexpensive goods sold
through chains such as discounter Target
Corp. and apparel retailer Hennes & Mauritz
AB have become more fashionable, wooing
consumers to shop in places they otherwise
would not have considered.
Apparel and footwear companies face
challenges, thanks to retail consolidation and
a slowing US economy. Companies are work-
ing to cope.
Clothing makers adapt to face
challenges
A large deal in the department store indus-
try has changed the landscape for many appar-
el companies. In August 2005, Federated
Department Stores Inc., owner of the Macy’s
and Bloomingdale’s department store chains,
purchased smaller rival May Department
Stores Co., owner of Lord & Taylor, Filene’s,
and the Marshall Field’s chains, among others,
for $11.9 billion in cash and stock. The com-
bined company generated sales of $26.97 bil-
lion through about 850 stores in 2006.
The merger has hurt clothing companies
that sold goods to both companies by reduc-
ing the footprint of retail floor space. Feder-
ated rebranded more than 400 May stores to
the Macy’s name and is creating a nation-
wide department store chain that can be
marketed on television and other mass me-
dia. Federated closed duplicative outlets, and
sold the 48-store Lord & Taylor chain to pri-
vate equity firm NRDC Equity Partners.
Department store retailers are changing
their merchandise mix to stand out and con-
vince shoppers they have products not avail-
able elsewhere. The department stores are
phasing out wardrobe basics that sell for less
than brand-name goods and bringing in more
fashionable private-label goods. Federated is
promoting its Alfani, greendog, and Charter
Club private label brands. Mid-priced depart-
ment store operator J.C. Penney Corp. is intro-
ducing and promoting more private label
brands, including a.n.a. for women and Am-
brielle lingerie. Department store chains are
also dropping brand names that have under-
performed, putting further pressure on clothing
companies. Federated recently dropped
Kellwood’s Sag Harbor line for women.
Clothing companies streamline their business
Apparel makers are streamlining their
companies to deal with the consolidation and
merchandising shifts in department stores,
usually their largest customer-type.
Clothing companies are focusing on their
best-performing brands. Liz Claiborne Inc. in
MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY
APPAREL & FOOTWEAR’S SHARE OF TOTAL
PERSONAL CONSUMPTION EXPENDITURES
(In percent)
7.0
6.5
6.0
5.5
5.0
4.5
4.0
3.5
3.0
1976 78 80 82 84 86 88 90 92 94 96 98 00 02 04 2006
Source: US Department of Commerce.
1
apf_0507.qxp 5/14/2007 1:07 PM Page 2

APPAREL MANUFACTURERS’ Companies strike exclusive deals

RETAIL OPERATIONS — 2007 At the same time apparel and footwear
RETAIL companies are losing business in department
# OF AS % OF
COMPANY STORES NET SALES* stores to private label, they are striking deals
Carter's Inc. 376 42 with retailers to offer them exclusive merchan-
Coach, Inc.† 304 76 dise as a way of guaranteeing business in
Branded stores 218 … stores. Polo Ralph Lauren Corp. in January
Factory stores 86 … 2007 formed a Global Brand Concepts unit,
Jones Apparel Group 1,132 31 which will develop new brands for specialty
Barney's 20 … and department stores. The company’s first
Branded stores 411 … venture is the creation of the American Home
Outlets 701 …
line of apparel and home furnishings for sale
Liz Claiborne 735 31
exclusively at J.C. Penney & Co. starting in the
Branded stores 399 …
spring of 2008.
Outlets 336 …
In other retailer deals, Federated’s Macy’s in
Nike 418 NA
2007 began exclusively selling Oscar de la
Oxford Industries 42 NA
Phillips-Van Heusen 700 NA
Renta’s O Oscar line of clothing. At discounter
Polo Ralph Lauren 282 42 Target’s stores, Hanesbrands Inc.’s Champion
Branded stores 137 … offers an exclusive line of C9-branded sporting
Outlets 145 … apparel. Juicy Couture launched an exclusive
Quiksilver 487 NA fragrance at Federated’s Bloomingdale’s.
Branded stores 276 …
Licensed stores 211 … Apparel makers open stores
Timberland 81 13 With department store space dwindling,
Branded stores 20 … many apparel makers are turning into spe-
Factory stores 61 … cialty retailers, opening their own stores
Wolverine 82 NA where they can control how their merchan-
V.F. Corp. 538 14 dise is displayed and ensure it won’t fight for
Branded stores 460 … floor space with competitors or a retailers’
Outlets 78 … private-label goods. Liz Claiborne operated
NA-Not available. *Includes Internet and catalog sales. †Fiscal 399 stores as of the end of 2006. The com-
year ended June 2006.
Source: Company reports.
pany has said it hopes to eventually generate
as much as 40% of sales from its own stores,
up from 28% in 2006.
February 2007 said it would close the Mexx VF opened 400 single-branded stores in
line of stores in the United States, after the the last four years, featuring lines such as
brand failed to catch on following its intro- North Face and Vans. Polo Ralph Lauren
duction to the US in 2003. The stores will says it sends fresh products to stores con-
remain open in overseas markets. Liz Clai- tinuously; it also sells exclusive goods that
borne is also shutting down its line of Elisa- can be found only at its own branded
MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY

beth apparel, which caters to plus-sized
women, as well as its Laundry by Shelli Segal
stores. The company is focusing instead on
brands including Lucky, Juicy Couture, and
Sigrid Olson. Liz Claiborne may drop more
underperforming brands, chief executive
William McComb said in February 2007.
VF Corp., the largest US apparel compa-
ny, with brands including The North Face
and Wrangler jeans, in April 2007 sold its
Vanity Fair line of intimate apparel to Fruit
of the Loom Inc., a division of Berkshire
Hathaway Inc., for $350 million. The sale
allows VF to focus on higher-margin busi-
nesses, such as outerwear and denim.
stores, as a way of driving shoppers to its
outlets. (See the table “Apparel manufac-
turers’ retail operations” for more detail
on apparel makers’ retail outlets.) Shoe-
maker Deckers Outdoor Corp. is opening
up stores to sell its Uggs brand of sheep-
skin boots, normally found in department
stores and shoe stores.
Going abroad
Apparel makers are also looking outside
their home market in search of faster growth,
with clothing sales rising at low- to mid-single
digit rates and retail consolidation. For man-
ufacturers, many of the new overseas mar-

2
apf_0507.qxp 5/14/2007 1:07 PM Page 3
kets are attractive due to growing middle
class populations and a lack of branded
clothing available for sale.
International sales accounted for 28% of
Liz Claiborne’s revenue in 2006, up from
just 4% in 2000. The company has said it
hopes to eventually reach 35% in interna-
tional sales. VF Corp. in 2006 formed a
venture with licensing partner Arvind Mills
Ltd. VF expects its apparel sales in India to
grow at more than 25% a year, up from
$40 million presently, because of the joint
venture. Indian consumers have taken to
VF brands, according to the company. The
world’s largest store selling Wrangler jeans,
a brand long associated with American
cowboys, is in Bangalore, India.
In China, as many as 300 million residents
are already in the middle class, and that num-
ber will increase as the country’s economic
boom continues. China’s consumer spending
makes up a smaller percentage of gross domes-
tic product (GDP) than in other countries, a
statistic likely to change in tandem with a
growing middle class.
Wealthier Chinese are particularly keen on
acquiring brand-name goods. China now ac-
counts for about 12% of luxury sales world-
wide, according to consulting firm Ernst &
Young. Spending on apparel there will rise to
about $170 billion by 2025 from $45 billion
in 2005, according to McKinsey & Company,
another consulting firm.
India is another promising market.
Young Indians are traveling abroad more
frequently and acquiring a taste for West-
ern fashion and brand-name goods. As a
result, sales of women’s branded apparel is
growing about 35% a year, and men’s is
rising by 22%, according to A.T. Kearney.
Indians are now being introduced to the
concept of chain stores in their own coun-
try. Domestic companies including Pantaloon
Retail Ltd. and Reliance Industries Ltd. are
pouring billions into retail to open net-
works of stores around the country.
Apparel and accessories retailer Guess? Inc.
is opening stores in both China and India.
Other Asian markets are appealing as well.
Clothing specialty retailer Gap Inc. will fran-
chise 15 stores that will open in Indonesia
over the next four years. Gap already has
plans with partner FJ Benjamin Holdings Ltd.
to open 30 of its namesake and Banana Re-
public stores in Singapore and Malaysia.
Sporting apparel goes high-tech
Athletic apparel has come a long way from
the era of pairing a dowdy gray cotton sweat
suit with tennis shoes. Now athletic togs
promise to hug the body with materials that
will insulate the wearer from cold weather,
while wicking away sweat to boost perfor-
mance. Running shoes sync with computers to
measure performance. Consumers have re-
sponded to the high-tech offerings, with sports-
wear apparel sales rising 67% in the last 10
years to $28.8 billion in 2006, according to the
Sporting Goods Manufacturers Association, an
industry trade group.
Other advances in sports apparel include
tagless and stitchless T-shirts and fabrics that
manage odors. Technological advancements al-
low manufacturers to maintain or increase
prices and keep consumers loyal to their brand.
One of the pioneers in advanced athletic ap-
parel is Under Armour Inc. The company,
founded in 1996, offers compression apparel
that regulates body temperature by wicking
away perspiration to keep an exerciser com-
fortable. Users wear the company’s HeatGear
line when it is warm, ColdGear when it is cold,
or AllSeasonGear for moderate temperatures.
The company’s revenue has doubled in the past
two years to $431 million in 2006 as it ex-
panded into apparel for women and footwear.
Adidas AG in 2005 introduced the Adidas_1
running shoe, which uses sensors, a micro-
processor, and a small motor to adjust the
level of cushioning provided by the shoe.
The technology is available in basketball
and running shoes.
Nike teamed with computer company
Apple Inc. to develop the Nike + iPod Sport
Kit, which allows Nike footwear to “com-
municate” with Apple’s iPod nano portable
MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY
music player. A user places a sensor into a
Nike sneaker, which relays information on
speed, distance, and calories burned to the
music player, which can then be broadcast
through the user’s headphones. Runners us-
ing the Nike plus system have logged more
than 10 million miles since the product
went on sale in July 2006, according to a
March 2007 statement from Nike.
Luxury, value goods both do well
The strongest demand for apparel and ac-
cessories is bifurcated between luxury goods
on the high end and inexpensive goods on
3
apf_0507.qxp 5/14/2007 1:07 PM Page 4
the low end. Upper–middle class and wealthy
consumers are more insulated from recent
trends, such as higher heating and gas prices,
that have reduced spending for middle class
and lower-income consumers.
Companies that sell to these markets are
thriving. Phillips-Van Heusen Corp., which
acquired the upscale Calvin Klein brand in
2003, posted a 39% increase in net income
in the year ended in February 2007, lifted by
demand for its Calvin Klein brand of men’s
better sportswear and the licensing of the
Calvin Klein name to new fragrances.
Upscale department stores are also experi-
encing strong sales growth. February same-
store sales, or sales at stores open at least a
year, rose 11% at luxury stores from the year
earlier and then rose an additional 13% in
March, according to trade group the Inter-
national Council of Shopping Centers.
Polo Ralph Lauren, whose profits have
risen on demand for its upscale apparel and
accessories, said in March 2007 it formed a
joint venture with luxury goods maker
Compagnie Financiere Richemont SA to de-
sign and sell precious jewelry and watches.
Shoppers are flocking to value goods, many
of which are improving in quality and fashion
thanks to an infusion of top designers turning
out moderately priced collections. Two Euro-
pean specialty retailers have been particularly
successful at offering lower-priced goods, and
both are undergoing aggressive expansions into
the United States. Both Sweden’s Hennes &
Mauritz AB (H&M) and Spain’s Industria de
Diseño Textil SA, known as Inditex, offer
what some call “disposable chic” or “fast
fashion” — exceptional fashion quality at
affordable prices.
The two retailers have used unconventional
MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY
means to expand their businesses. For example,
Inditex, based in Spain, does virtually no ad-
vertising, relying instead on sleekly designed
stores in centrally located neighborhoods in
major cities. Though Sweden’s H&M sells in-
expensive goods, it knows its shoppers are
fashion conscious. The chain in the past few
years has featured lines from designers Karl
Lagerfeld and Stella McCartney. In March
2007, H&M rolled out M by Madonna, a line
of clothing designed by the pop singer.
Both are enjoying success. For the year
ended November 30, 2006, H&M’s sales
rose 12% to 68.4 billion Swedish krona
($9.17 billion). Sales at Inditex, which oper-
4
ates under eight banners, including Zara,
Oysho, Pull and Bear, rose 22% to €8.2 bil-
lion ($10.4 billion) the year ended January
31, 2007. (Note: All currency conversions in
this Survey are at average exchange rates for
the period in question, except where noted.)
US-based apparel retailers and manufactur-
ers are wooing designers to produce merchan-
dise at the low end. Discounter Target has
featured lines by designer Isaac Mizrahi, Liz
Lange, and Mossimo Giannulli. Gap in April
2007 introduced Gap Design Editions, select-
ing three up-and-coming design labels to pro-
duce their version of the iconic white shirt.
Steve & Barry’s, a clothing chain known
for selling T-shirts, sweatshirts, jeans, and oth-
er basics, often for under $10 an item, signed
actress Sarah Jessica Parker to help design a
line of fashionable women’s clothing. Called
Bitten, every piece in the collection will sell for
$19.98 or less, according to press reports.
Parker, known for her sense of style, said she
picked the chain because she grew up in a
family of eight children that faced financial
difficulties. The chain is hoping to build upon
the success it has enjoyed with its $14.98 Star-
bury basketball sneakers, endorsed by New
York Knicks basketball player Stephon Mar-
bury, who wears them during games. Steve &
Barry’s has since expanded its product line
from 50 items to 200, including apparel and
women’s athletic shoes.
Economic growth spurs consumer
spending
US economic growth continues, helping
many apparel companies and clothing retail-
ers post higher sales growth in the first part
of 2007. In March, apparel retailers includ-
ing Gap Inc., Abercrombie & Fitch Co., and
Ann Taylor Stores Corp. posted results that
exceeded analysts’ estimates. Still, sales likely
benefited from warmer-than-usual weather in
March in much of the US, as well as from
sales spurred by the Easter holiday.
The US economy, as measured by GDP,
grew at an annualized rate of 2.2% in the
fourth quarter of 2006, up from growth of
2.0% in the third quarter of 2006, according
to the Bureau of Economic Analysis (BEA), an
agency of the US Department of Commerce.
As of March 2007, Standard & Poor’s
was projecting that personal consumption
expenditures (PCE) will rise 3.1% in 2007,
apf_0507.qxp 5/14/2007 1:07 PM Page 5
S&P Ratings Services View:
Outlook mixed
Our credit outlook for the apparel industry remains mixed.
Industry conditions and financial policies will continue to be
a key focus in the near-to-intermediate term.
Challenging industry conditions
Demand for apparel remains relatively constant compared
with prior years. Because sales depend on consumer sentiment,
however, they are expected to be somewhat affected by current
economic conditions. Higher fuel and energy costs will con-
sume a larger share of disposable income, especially for
consumers who patronize the lower- to moderately-priced seg-
ments. Because that customer is also more value-conscious
and demanding with respect to fashion, apparel firms that sell
proprietary labels to growing national chains (such as J.C. Pen-
ney and Kohl’s) will fare better.
The luxury apparel sector remains unaffected by economic
conditions and is expected to continue its robust growth. Firms
such as Polo Ralph Lauren and Liz Claiborne (with its Juicy
Couture brand) will likely benefit from this trend. Nevertheless,
having the right portfolio of brands that resonate with the con-
sumer will continue to drive apparel firms’ growth.
Ongoing consolidation
Retailer consolidation and M&A activity will continue to
play an important role in apparel firms’ growth and financial
after a 3.2% increase in 2006. Our projec-
tion for real GDP is for a gain of 2.4% in
2007 and 3.0% in 2008, following an in-
crease of 3.3% in 2006.
Linked to a growing domestic economy
is the employment environment, which re-
mains strong. The unemployment rate
stood at 4.4% in March 2007, a five-year
low. Payrolls rose by 180,000 in March
2007; this speaks to the economy’s ability
to generate new jobs, thereby increasing
consumer spending. Wages are going up as
well. As of March 2007, Standard &
Poor’s was forecasting an average unem-
ployment rate of 4.8% in 2007 and 4.7%
in 2008, up from 4.6% in 2006.
Consumer confidence is one of the foun-
dations of consumer spending and is of
greatest importance to the footwear and
apparel industry. The University of Michi-
gan’s consumer sentiment survey slipped in
March 2007 to 88.4 from 91.3 in February
(1966=100). Rising prices, especially for
gasoline, slowing wage growth, and con-
strategies. We expect the larger firms to engage in acquisition
activity to further their growth, though most of these transac-
tions will likely be the addition of smaller, complementary
brands or the re-acquisition of licenses.
Shareholder enhancement
We expect apparel companies to continue to seek a bal-
anced approach to meeting the needs of their shareholder
and credit constituents. In general, we view the risk of ac-
quisitions or other events that would harm credit quality as
moderate in the intermediate term. Nevertheless, given the
excess liquidity in private equity funds and their increasing
appetite for retail and apparel sector investment, companies
will probably continue their share buybacks and other activi-
ties designed to benefit shareholders.
The apparel sector has yet to experience increased
shareholder activism. Therefore, we expect share repur-
chases to be funded primarily with free cash flow and to
be adjusted as necessary to ensure that credit measures
remain appropriate for the credit ratings. In general, we ex-
pect apparel companies to maintain stronger-than-average
credit measures in order to offset some of the fashion and
business risks inherent in the industry. ■
Susan Ding
Apparel Credit Analyst
cerns about the economy’s direction led to
the decline.
The Conference Board, a private research
organization, also reported a dip in senti-
ment in March 2007. The index fell to 107.2
(1985=100) in March, down from 111.2 in
February. The present situation index in-
creased slightly.
US apparel sales rose 5.1% in 2006 to
MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY
$190.1 billion, according to the NPD Group,
a market research firm. Sales of women’s ap-
parel rose 5.3% to $102 billion, while men’s
apparel sales rose 2.9% to $54.8 billion.
Sales of children’s clothing rose 8.4% to
$33.3 billion.
Women’s clothing represented 54% of
all apparel sales in 2006. The men’s appar-
el segment made up 29% of clothing sales.
Children’s apparel (clothing for boys, girls,
infants, and toddlers) made up the rest
with 17%. ■
5
apf_0507.qxp 5/14/2007 1:07 PM Page 6
I NDUSTRY P ROFILE
The industry that suits everyone
Through February of 2007, US consumers
spent an annualized $369.7 billion on cloth-
ing and footwear, up 4.2% from the $354.8
billion spent in the year-earlier period, ac-
cording to the US Department of Commerce.
Given an estimated US population of 301.6
million as of February 2007, per capita ex-
penditures on clothing and footwear equaled
roughly $1,226.
US employment levels in apparel and
footwear manufacturing have fallen drastically.
According to the US Department of Labor, do-
mestic apparel employment has fallen by 79%
from the mid-1990s — to 181,300 in February
2007 from 853,800 in December 1994. In-
creased quotas, reduced tariffs, and a string of
free-trade and preferential trade agreements
have contributed to the steady flow of manu-
facturing jobs out of the United States and
into low-cost countries in Asia, Latin America,
Africa, and the Caribbean. According to De-
partment of Labor data, apparel employment
peaked in 1973 at 1.45 million; since then, the
sector has shed more than a million jobs.
Apparel
With respect to both manufacturing and
retailing, the US apparel industry is large,
mature, and highly fragmented. Apparel sold
MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY
US APPAREL INDUSTRY EMPLOYMENT
(Production workers, in millions)
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
1959 63 67 71 75 79 83 87 91
Source: Bureau of Labor Statistics.
6
in the United States is made both domestically
and internationally. (Some of the largest US-
based apparel wholesalers are listed in the
“Major apparel companies” table.)
Domestic apparel manufacturers’ ship-
ments totaled $29.13 billion in the last 12
months through February 2007, according to
the US Census Bureau, down 1.9% from
$29.7 billion in the year-earlier period.
Apparel worth $71.629 billion was im-
ported into the United States in 2006, up
4.2% from the $68.713 billion imported in
2005. Exports of US-made clothing contin-
ued to fall; the 2006 figure was $4.32 bil-
lion, down 3.4% from the $4.47 billion
posted in the year-earlier period.
US retail sales at clothing and accessories
stores rose 6.7% to $216.8 billion in the 12
months through February 2007 from $203.2
billion in the 12 previous months, according
to the Department of Commerce. Sales rose
6.7% to $214.6 billion in 2006.
The US apparel market can be divided
into two tiers: national brands and other ap-
parel. National brands, produced by about
10 sizable companies, currently account for
some 15% of all US wholesale apparel sales.
The other apparel category, accounting for
about 85% of all apparel distributed, com-
prises small brands and private-label (or
store brand) goods.
Footwear
Like the apparel business, the US footwear
industry is mature and fragmented, and its
manufacturing base is declining. According
to NPD Group, a consumer market re-
search firm, total footwear sales in the
fourth quarter rose 2.6% to $11.7 billion.
In the fourth quarter of 2006, casual shoes
made up 28% of sales, followed by dress
casual (20%), other leisure shoes (15%),
95 99 03 2007 running shoes (9%), and basketball shoes
(7%). Other shoe categories include hiking,
evening, and tennis.
apf_0507.qxp 5/14/2007 1:07 PM Page 7

MAJOR APPAREL COMPANIES May 2006, Nike generated 53% of its sales
FISCAL overseas.
YEAR SALES
COMPANY ENDING (MIL. $) Footwear companies, particularly manu-
Nike May '06 19,965 facturers of athletic footwear, have diversi-
V.F. Corp. Dec.'06 6,216 fied into related apparel and sporting goods
Liz Claiborne Dec.'06 4,994 categories as a way to extend their brand’s
Jones Apparel Group Dec.'06 4,743 reach and grow revenues. In addition to
Hanesbrands July '06 4,473 sneakers, Nike offers golf clubs, watches,
Polo Ralph Lauren Mar '06 3,746 and yoga mats.
Quiksilver Oct.'06 2,362
Kellwood Feb.'07 1,962
Phillips-Van Heusen Jan.'06 1,909
Warnaco Dec.'06 1,830
INDUSTRY TRENDS
Timberland Dec.'06 1,568
New Balance* Dec.'06 1,555 Most trends affecting apparel and
Carter's Inc. Dec.'06 1,343 footwear manufacturers today are driven by
Wolverine Dec.'06 1,142 consumer demand and relate to the size of
Oxford Industries May '06 1,109 the various demographic groups and their
*Privately held. particular wants, shopping patterns, and
Source: Company reports. spending power. Changing styles in work-
place and leisure attire also are influencing
According to data from the American retail and manufacturing operations. Private
Apparel & Footwear Association, a trade equity firms are buying up apparel compa-
association, US footwear imports totaled nies at the same time there is consolidation
2.37 billion pairs of shoes in 2006, up 5.3% among manufacturers entering new markets
from 2.25 billion pairs in 2005. Domestic and product lines.
shoe production has fallen to represent less
than 5% of shoe purchases in the US in re- Private equity firms go shopping in
cent years. the apparel sector
While the United States imports most of
its soft-sole footwear, it is particularly strong Private equity firms that are flush with
in the manufacture of protective or safety cash are buying up apparel makers and re-
footwear (most of which feature steel safety tailers. The private equity sector’s interest
toes). Interestingly, domestic footwear pro- in retail may have started when Edward
ducers often import shoes to offer a diversi- Lampert’s ESL Investments fund acquired
fied catalog. discount retailer Kmart Corp. in 2002.
Lampert’s firm sold 100 store locations to
Internationalization and diversification department store operator Sears, Roebuck
Today, the footwear industry is truly and Co. and Home Depot Inc., the home
global in nature, with large manufacturers improvement retailer, unlocking the value of
sourcing products from and selling prod- some of its real estate. Under Lampert,

MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY

ucts in different countries over several con-
tinents. A multinational strategy allows
manufacturers facing a slow economy in
one country to keep expanding revenues by
focusing on selling in the faster-growing
economy of another country.
For instance, US-based companies such
as Nike Inc. have countered slow domestic
results by growing sales through increased
penetration in the well-developed markets
of Western Europe (including the United
Kingdom, Germany, and France) and by
entering new Eastern European markets
(including countries such as Poland and the
Czech Republic). In the fiscal year ended
Kmart later merged with Sears in a combi-
nation of two struggling retailers.
Private equity firms can provide retailers
with cash to grow, which the buyers of luxury
department store Neiman Marcus Group Inc.
are doing. An investment group led by private
equity firms Texas Pacific Group and Warburg
Pincus LLC bought the department store
chain for $5.1 billion in cash and assumed
debt in October 2005. Neiman Marcus plans
to open as many as 14 new stores to reach
50 to 52 locations. Another company that
agreed to be acquired is clothing retailer
Burlington Coat Factory Warehouse Corp.,
which was sold in April 2006 to Bain Capital

7
apf_0507.qxp 5/14/2007 1:07 PM Page 8
Partners LLC for about $2.06 billion. Hilco
Consumer Capital LLC in January 2007 pur-
chased Apparel Holdings Group, owner of
the Caribbean Joe and other brands.
For retailers and apparel companies, going
private frees them from the pressure of share-
holder expectations and quarterly earnings re-
ports. As public companies, the pressure to
report ever-higher profits forced the firms to
constantly expand brands into new channels.
Such expansion runs the risk of tarnishing the
cachet of upscale brands as they become ubiq-
uitous. With no quarterly earnings pressure, a
company can keep niche brands small.
Still, private equity’s interest in apparel
may be fading. Boot maker Timberland Co.
reportedly ended an auction in February
2007 after failing to attract sufficient interest
from buyers. Jones Apparel said in March
2006 it hired investment bank The Goldman
Sachs Group Inc. to explore a sale of the en-
tire company. Subsequently, however, Jones
pulled itself off the market, saying potential
buyers failed to see the value in the company.
Others said the company’s problems may
have dissuaded investors.
Investors in outdoor clothing retailer
Eddie Bauer Holdings Inc. in February 2007
rejected a $286 million takeover offer from
two private equity firms. The struggling firm
put itself up for sale the previous year.
At least one private equity firm that invests
in retail has money left to spend. Leonard
Green & Partners LP, which in February 2007
acquired Federated Department Stores Inc.’s
bridal business, raised a private equity fund
worth $5.3 billion the following month, ac-
cording to newspaper the Daily Deal.
Diversifying to survive
MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY
Relying on a single product line, market
segment, or sales channel can lead to failure for
apparel or footwear companies. To survive,
they must come up with new designs, either as
product line extensions or as wholly new prod-
uct lines. They can develop these new products
internally — a process that requires a great
deal of investment in time, research and devel-
opment, and marketing — or they may obtain
them externally by signing licensing agreements
with, or even acquiring, another company.
A recent trend for apparel brands, offer-
ing an opportunity for sales growth along
with pricing stabilization, is activewear, a
8
APPAREL PRICE INDEXES
(1982–84=100)
220
CPI-Total
200
180
160
Men’s and boy’s apparel Footwear
140
120
Women’s and girl’s apparel
100
1997 98 99 00 01 02 03 04 05 06 2007
CPI-Consumer price index.
Source: Bureau of Labor Statistics.
category that is blurring the lines between
casual clothes and performance activewear
(clothing worn for a particular activity, such
as yoga or boxing). In the past, athletic con-
sumers were more concerned with the per-
formance characteristics of the apparel they
wore during physical activities rather than
comfort and style. Increasingly, however,
consumers are demanding activewear that
not only is functional but also looks and
feels good. Conversely, sports-inspired de-
signs are finding their way into casual ap-
parel. This is an example of lifestyle
branding and is particularly true of young
consumers who are very conscious of the
brands and types of activewear they sport
on and off the playing field.
According to the Sporting Goods Manu-
facturing Association, an industry trade
group, sales of sports apparel rose 8.3% to
$28.8 billion in 2006. About 60% of sports
apparel sold is not used in an active sport,
according to the NPD Group, a consumer
market research firm.
Buying into new markets
Acquiring another company is a way to
eliminate current or potential competitors,
while adding to the acquirer’s top line and
market share. In mature industries, such as
apparel and footwear, acquisitions are often
the purchaser’s only route to sales growth.
They also can enable companies to combat
pricing pressures by developing megabrands
and maximizing operating efficiencies. (The
table entitled “Apparel company mergers &
acquisitions” highlights recent major acquisi-
tions in the apparel and footwear markets.)
apf_0507.qxp 5/14/2007 1:07 PM Page 9
US IMPORTS AND EXPORTS OF APPAREL
(In billions of dollars)
80
70
Imports
60
50
Exports
40
30
20
10
0 company acquired Skylark Sport Marketing
1990 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 2006
Source: US Department of Commerce.
Standard & Poor’s believes the consoli-
dation of the retail industry has given larg-
er retailers the power to dictate terms to
their suppliers, often requiring costly in-
vestments in infrastructure and technology
that are compatible with the retailer’s. One
example is technology that allows for the
automatic replenishment of inventory by
providing the manufacturer with point-of-
sale data on units sold and price. This is
likely to result in continued consolidation
among apparel, accessory, and footwear
suppliers, as many smaller industry partici-
pants will not be able to make these invest-
ments on their own.
When brands with strong consumer
recognition are acquired, they provide new
licensing opportunities as well. For instance,
Jones Apparel Group Inc. expects its Anne
Klein label to offer strong royalty streams
from the licensing of key accessories, such as
watches, footwear, and eyewear.
If an acquired firm’s product lines are sim-
ilar to its own, the acquiring company usual-
ly is able to merge production lines, cutting
overall expenses by sharing facilities. Howev-
er, apparel and footwear makers are just as
apt to make acquisitions to diversify their
product mix. Offering other types of prod-
ucts allows apparel and footwear companies
to balance their product portfolios, allowing
a better-performing product line to offset a
poorly performing line.
For instance, Liz Claiborne Inc. and Jones
Apparel have used acquisition strategies, as
well as licensing agreements, to broaden their
brand portfolios. Traditionally sellers of ap-
parel and accessories in the better-to-bridge
categories, both companies have sought to
penetrate the broader moderate market, as
well as distinct niche markets.
◆ Liz Claiborne. In January 2005, Liz
Claiborne purchased C&C California Inc., a
designer, marketer, and wholesaler of premium
apparel primarily targeted at the fashion-
conscious women between the ages of 18 and
45. C&C sells its products primarily through
select specialty and department stores. To offer
more athletic wear, in November 2005, the
Corp., which sells clothes for hiking and yoga
under the prAna name. In January 2006, Liz
Claiborne acquired Westcoast Contempo
Fashions Limited and Mac & Jac Holdings
Limited, which produces the Mac & Jac,
Kenzie, and Kenziegirl lines of clothing. The
company in December 2006 paid $124 mil-
lion for handbag maker Kate Spade LLC.
◆ VF Corp. The world’s largest apparel
company, with annual sales exceeding $6
billion, has long employed acquisitions as
fundamental to its growth strategy. VF
Corp. has identified lifestyle brands as the
most attractive acquisition candidates be-
cause they target a particular consumer au-
dience and extend the brand across multiple
product categories. Nautica, acquired in
2003, is a case in point. Following extensive
consumer research, the company is busily
rebranding Nautica, with the long-term
goals of entering Europe and ultimately ex-
tending the brand to women’s apparel. In
April 2005, the company bought sandal
maker Reef Holdings Corp. to complement
its line of outdoor brands, including North
Face and Eastpak. In March 2007, VF bought
Majestic Athletic Inc., which manufactures
MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY
the uniforms used by all 30 Major League
Baseball teams.
In other recent deals, men’s dress shirt
manufacturer Phillips-Van Heusen Corp. in
January 2007 purchased tie maker Superba
Inc. for $180 million.
All of these diversification strategies have
built volume and lessened the risks of being
too focused on a particular segment of the
market. However, acquisitions are not without
their downsides, including the costs of bor-
rowing and of assuming the acquired compa-
nies’ liabilities. Such costs must be reduced —
and many synergies achieved — before an
acquisition can be accretive to earnings.
9
apf_0507.qxp 5/14/2007 1:07 PM Page 10
Nonetheless, with pressure to increase top-line
growth and intensifying competition among
the megabrands, Standard & Poor’s expects
more acquisitions to occur over the next year.
Following the demographics
In order to cater to growth in certain
age groups, retailers are rolling out new
stores that cater to various demographics.
The new concept should benefit by tapping
into age groups that may not feel well
served by already-established stores. For
the retailers, the new stores are a way to
hold onto consumers that may have out-
grown shopping at an Abercrombie &
Fitch or an American Eagle Outfitters.
Stores that cater to multiple age groups are
losing ground. Department stores have lost
sales to specialty retailers for years, while the
flagship chain of the Gap Inc. is suffering
monthly same-store sales declines as it strug-
gles to define its customer base.
Echo boomers in focus
One of the more apparent trends among ap-
parel and footwear companies in recent years
has been a focus on marketing to the roughly
60 million people born between 1979 and
1994, known as Generation Y, the Millennium
Generation, Echo Boomers, or the boomlet.
These are the children of the baby boomers.
New stores have popped up to serve the boom-
lets, including Rugby by Polo Ralph Lauren
Corp., which is aiming to woo the college-age
and early 20s shopper away from rivals (such
as Abercrombie & Fitch Co.) with high-end ca-
sual clothing and business wear. Founded in
2004, there are now nine store locations. Not
to be outdone, Abercrombie launched Ruehl,
MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY
which is aimed at men and women aged 22 to
35. US teenagers spent $179 billion in 2006,
according to Teenage Research Unlimited, a
market researcher specializing in the teen mar-
ket, up 13% from 2005.
Retailers struggle to draw older women
Retailers have had mixed results catering
to women over 35, which previously have
enjoyed little attention from specialty retail-
ers. Unlike her mother, this particular con-
sumer is less likely to shop in a department
store and grew up shopping in specialty re-
tailers. This consumer has more money to
spend on clothes and likes to update her
10
wardrobe to add to her working wardrobe
and to reflect shifting tastes.
Some examples of new stores striving to
serve this demographic are Abercrombie’s
Ruehl, aimed at men and women aged 22 to
35, and American Eagle Outfitters Inc.’s
Martin + Osa, named for a husband and
wife team of explorers.
Specialty retailers are losing out to de-
partment store chains that are improving
their merchandise to win older women
back. Chains including J.C. Penney Co.
and Kohl’s Corp. are offering more exclu-
sive private label goods that are fashion-
able. Gap Inc., the largest US apparel
retailer, is shutting its Forth & Towne
chain, aimed at women over 35. Gymboree
Corp., which operates a chain of children’s
clothing stores, in early 2007 closed
Janeville, a chain of stores for women in
their 30s. American Eagle recently named
new executives in charge of Martin + Osa
and is believed to be retooling the chain
because of disappointing sales.
Chico’s FAS Inc., which owns a chain of
stores targeting women over 35, said in
March 2007 it was closing Fitigues, an up-
scale casual clothing chain. Chico’s acquired
Fitigues in 2006.
Young men dressing up
The casual look began its ascendance in the
early 1990s, when corporate America started
emulating the less-rigid dress policies of high-
tech industries. Often, the philosophy behind
the switch from suit and tie to casual attire
was that, if employees were working long
hours, they should be allowed to do so com-
fortably. Gap rode the success of khakis for a
decade, but ultimately became a victim of its
own success: by 2000, khakis were ubiquitous,
and the wearer no longer needed Gap’s stamp
of approval (i.e., the Gap brand) to feel appro-
priately dressed when wearing khakis. The ca-
sual look is one factor that drove deflationary
apparel pricing in the last decade.
In the aftermath of the Internet bust, how-
ever, the American workplace has been revert-
ing to more formal attire. Retail trends reveal
that suits are again selling. For women, the
business suit has been tweaked to convey femi-
ninity; for men, its construction has become
more form-fitting. Sales of slacks rose 7.2% in
2006, compared to 5.4% growth for jeans.
Men aged 25 to 34 increased purchases of suits
apf_0507.qxp 5/14/2007 1:07 PM Page 11

APPAREL COMPANY MERGERS & ACQUISITIONS — 2004-07

CLOSING
DATE ACQUIROR TARGET APPROXIMATE VALUE
Apr. 07 Berkshire Hathaway VF Corp.'s intimates business $350 million
Mar. 07 VF Corp. Majestic Athletic terms undisclosed
Jan. 07 Phillips Van-Heusen Superba $180 million
Dec. 06 Liz Claiborne Kate Spade $124 million
Oct. 06 Kellwood Co. CRL Group terms undisclosed
Sep. 06 Stride Rite Corp. Robeez Footwear $27.5 million
Aug. 06 Berkshire Hathaway Russell Corp. $600 million
May. 06 Talbots J. Jill $517 million
May. 06 Apax Tommy Hilfiger $1.6 billion
Feb. 06 Polo Ralph Lauren Jones Apparel jeans unit $355 million
Jan. 06 Adidas-Salomon AG Reebok $3.8 billion
Jan. 06 Liz Claiborne Westcoast Contempo $23.6 million
Sep. 05 Stride Rite Corp. Saucony $170 million
Jul. 05 Iconix Brand Group Inc. Joe Boxer $40 million
Jul. 05 Carter's Inc. Oshkosh B'Gosh $312 million
Apr. 05 VF Corp. Reef Holdings terms undisclosed
NA Quiksilver Rossignol terms undisclosed
Jan. 05 Liz Claiborne C&C California $29.5 million initial payment, with
contingent payments expected.
Dec. 04 Russell Corp. Brooks Sports $115 million
Dec. 04 Jones Apparel Group Inc. Barneys New York Inc. $286.3 million
Aug. 04 Nike Official Starter $47.2 million
Jul. 04 Russell Corp. Huffy Sports $30 million
Jul. 04 Jones Apparel Group Inc. Maxwell Shoe Co. Inc. $345.8 million
Jul. 04 Polo Ralph Lauren Certain assets of RL Childrenswear $240 million
Company LLC
Jun. 04 VF Corp. Vans Inc. $396 million
Jun. 04 Oxford Industries Ben Sherman Ltd. $146 million
Jun. 04 Dick’s Sporting Goods Gaylan Trading $362 million
Jun. 04 Jones Apparel Group Inc. Maxwell Shoe Co. Inc. $346 million
Jun. 04 Reebok The Hockey Company $204 million, plus the assumption of
$149 million in debt
Jun. 04 VF Corp. Kipling Brand $185 million
May. 04 Quiksilver DC Shoes $144.2 million
Feb. 04 Kellwood Co. Phat Fashions $140 million, plus contingent payments

Source: Company reports.

by 13%, and suit sales rose 12% for men aged agreement between two business entities: the

MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY

18 to 24. Mass-merchant retailers offering suits
at lower prices have made them more popular,
according to NPD.
For women, dress sales rose 7% in 2006,
and hosiery sales rose 3.5%, helped by a
34% jump in sales of tights.
Licensing builds megabrands
Licensing — the process of leasing a trade-
marked entity, such as a name, likeness, logo,
graphic, saying, signature, or character —
has become an increasingly common practice
among apparel and footwear companies.
Licensing usually is based on a contractual
licensor (the owner or agent of the property)
and the prospective licensee (usually a manu-
facturer), who agrees to pay the licensor roy-
alties based on the product’s sales. These
arrangements benefit both the licensor and the
licensee; the former sees an extension of its
brands and receives royalties, while the latter
gains a new revenue stream.
More often than not, a manufacturing
company will seek to acquire the license
for a product or line for which it already
has the production capacity. Licenses, like
acquisitions, provide a source of revenues
and cost savings in manufacturing and
distribution.

11
apf_0507.qxp 5/14/2007 1:07 PM Page 12
Clothing and apparel makers currently
involved in licensing arrangements include
Liz Claiborne, which holds certain apparel
licenses under the DKNY Jeans, DKNY
Active, and City DKNY trademarks; jewel-
ry products under the Kenneth Cole New
York and Reaction Kenneth Cole trade-
marks; and fragrance, cosmetic, and beauty
products under the Candie’s trademark.
Reebok markets apparel and footwear un-
der such licensed brands as Greg Norman,
the National Football League, and the Na-
tional Basketball Association.
Some manufacturers do not sell goods
under their own brand names at all. For
example, G-III Apparel Group Ltd., a mak-
er of outerwear, holds fashion licenses
from Kenneth Cole Productions Inc., Cole
Haan (owned by Nike), Sean John, and
Jones Apparel (including the Nine West
brand). It also has licensing agreements
with national sports leagues and more than
20 universities.
Often, companies with well-recognized
brand names license the use of those names
for products that they do not have the manu-
facturing and/or marketing resources to han-
dle themselves. For example, Mossimo Inc.
derives close to 90% of its revenues as a li-
censor and designer for Target Corp. Acces-
sory manufacturers have purchased the rights
to use well-known apparel brand names on
watches (Adidas, Fendi, Hugo Boss, and
Gucci) and sunglasses (Anne Klein, Eddie
Bauer, Brooks Brothers, Timberland, and
Fila). The Tommy Hilfiger and Liz Claiborne
brands are found on all sorts of items, from
jewelry to bed linens.
More recently, we have seen luxury
brands buying back their licenses to have
MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY
greater control over their brand, to capture
the economic profits their labels provide,
and to better control their corporate des-
tiny. In the past two years, Polo Ralph Lauren
brought its Lauren license in-house (taking
it back from Jones Apparel), as well as its
children’s and footwear licenses. Kenneth
Cole has pursued the same strategy. Polo
Ralph Lauren’s strategy has helped it boost
its brand cachet by carefully controlling
where goods are sold; the company has
pulled its merchandise from discount retail-
ers, including Ross Dress for Less and TJ
Maxx. The company said in May 2006 that
it would discontinue its Polo jeans line in
12
the US and add jeans to its more upscale
brands including Polo Ralph Lauren. The
company’s Polo brand jeans sold for $85,
compared with $225 for a pair under the
upscale Polo Ralph Lauren line, according
to a Bloomberg News article.
Shorter cycles
In the past, retail stores often carried ap-
parel and footwear months in advance of
the season in which they would be worn.
Times have changed, however, and con-
sumers nowadays tend to buy closer to
need — especially in the junior category
(preteens to early 20s). To meet this de-
mand, manufacturers have had to shorten
cycles of design, development, production,
and distribution. For apparel and footwear
makers, considerable focus is now placed on
creating a “demand-pull” model versus the
“supply-push” model. (In demand-pull, con-
sumer demand is the driver of sales; in
supply-push, the manufacturer pushes goods
to the retailer regardless of consumer de-
mand.) By applying the principles of scientif-
ic management to apparel and footwear
manufacturing, both supply and retail dis-
tribution can be rationalized: as manufac-
turers and wholesalers attempt to improve
the supply-demand equation, the result
should be improved pricing and greater
brand equity.
To stay in tune with consumer needs and
trends, companies are emphasizing market re-
search. They also are reevaluating their manu-
facturing strategies. For apparel makers,
moving to offshore production lengthens the
turnaround time and makes it harder to re-
spond to quick changes in domestic demand.
Hence, apparel companies have had to main-
tain a modest level of domestic and/or West-
ern Hemisphere production to fulfill small,
seasonal, or special-item orders, as well as to
apply differentiating finishes.
Price deflation
Average selling prices for most apparel
and footwear have been in a long-term
downtrend. Contributing factors include
the continued influx of imports, retail pro-
motions, and market share gains by dis-
counters. This pressure on prices has
threatened margins at many apparel and
apf_0507.qxp 5/14/2007 1:07 PM Page 13
footwear companies, spurring them to seek
new ways to boost profitability.
Although overall total dollar sales of ap-
parel and footwear have risen since 1999, av-
erage selling prices have declined, as indicated
by the apparel consumer price index (CPI)
published by the Bureau of Labor Statistics
(BLS). According to BLS data, US apparel
prices were unchanged at 119.5 (1982-
84=100) in 2006 from 2005, the first year in
seven that prices did not decline year over
year. In 2006, men’s and boys apparel fell less
than 1%, while women’s and girl’s apparel
rose 1.2%, and infant’s and toddler’s apparel
fell less than 1%.
Price deflation has come at a faster pace
than in the recent past and has changed the
way retailers and apparel makers do business.
In an effort to avoid overstocking goods only
to later sell them at a discount, large retailers,
such as Federated Stores Inc., are keeping
leaner inventories. Also, US clothing compa-
nies, including the Gap Inc., are emulating the
success of European apparel chains Hennes &
Mauritz AB and Inditex SA. These retailers
stock new merchandise frequently (sometimes
as often as every day) and never carry too
many pieces of an item, giving shoppers a rea-
son to visit frequently and to buy something
they like when they see it, rather than waiting
for the item to go on sale.
Offshore sourcing
In the ongoing push to cut expenses, US
apparel and footwear manufacturers increas-
ingly have moved their production facilities
to lower-cost regions outside the United
States — notably Mexico, the Caribbean,
Central America, Asia, and sub-Saharan
Africa. However, as noted earlier, many
manufacturers have retained some facilities
in the United States to manufacture products
that require a fast turnaround time.
Following the 1995 implementation of
the North American Free Trade Agreement
(NAFTA) and the subsequent lowering of
tariffs, apparel manufacturing in Mexico and
the Caribbean grew significantly. The prox-
imity of these countries to the United States
means that their facilities can offer signifi-
cantly shorter shipping times compared with
Asian manufacturers, while also providing
low-cost production — factors that are espe-
cially important for basic goods.
Recent legislation sustains the long-term
shift to offshore sourcing. The Trade Act of
2002 was approved by the US Congress in
July 2002 and signed into law by President
George W. Bush. This legislation contains the
Trade Promotion Authority, which grants the
president the right to negotiate trade agree-
ments and gives Congress the final authority
to approve or disapprove those agreements. It
also contains the Andean Trade Preference
Act, which provides duty-free access to most
apparel, and virtually all footwear, from the
Andean region of South America (Bolivia,
Colombia, Ecuador, and Peru). The new legis-
lation made certain retroactive modifications
to the May 2000 Caribbean Basin Trade Part-
nership Act and the African Growth and Op-
portunity Act (AGOA), both of which carry
numerous breaks for footwear and apparel
from countries in those regions.
Standard & Poor’s believes that, while
tariff and quota preferences for apparel and
footwear produced in the Caribbean basin,
the Andean region and, to a lesser extent,
sub-Saharan Africa have temporarily in-
creased sourcing from these regions, the
trend is not likely to last. Over time, we ex-
pect China’s share of apparel and global
manufacturing to increase dramatically, facil-
itated by its entry into the World Trade Or-
ganization (WTO) on December 11, 2001,
and the elimination of quotas among all 149
WTO-member countries in 2005.
China accounted for 25.9% of all apparel
imported into the United States in 2006, ac-
cording to the American Apparel & Footwear
Association (AAFA), a trade group. That is
nearly double the share in 2004 and comes af-
ter textile quotas against the country were lift-
ed. In the footwear market, where quotas were
MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY
eliminated several years ago, China accounted
for 86.2% of all US imports in the 12 months
ended December 2006.
Having plants in Mexico and the Caribbean
provides a quick turnaround time that will
prove less significant than China’s lower
costs. Indeed, because the Internet speeds
communications between an apparel compa-
ny and its far-flung plants, thereby accelerat-
ing the cycles, geographic proximity may
become less of a concern.
China has other advantages as well. Its
factories employ highly skilled laborers ca-
pable of producing complex garments. In
contrast, AGOA-eligible countries are un-
13
apf_0507.qxp 5/14/2007 1:07 PM Page 14
able to produce fashionable, high-quality
garments due to the generally low levels of
technical expertise and literacy, underdevel-
oped infrastructure, and a dearth of capital.
In addition, companies that set up and run
plants in China are taxed by the Chinese
government at a lower rate than if those
plants were operating in the United States.
Moreover, by keeping their sweetened prof-
its in China, US-based apparel makers can
fund future growth.
HOW THE INDUSTRY OPERATES
Although apparel and footwear can be
considered as two separate industries, they
often overlap, with many companies selling
goods in both categories. In addition, their
consumer demand profiles are similar; appar-
el and footwear are both necessities, yet they
are partly discretionary as well.
At their most basic level, these industries
supply people with utilitarian attire that is
affordable and unlikely to change drastically
in style from year to year. For more fashion-
conscious consumers, the industries strive to
update their assortments to reflect changing
trends, or to offer innovative styles or fea-
tures that command a premium price.
While individual companies’ sales trends
depend on the specific products they offer,
overall industry demand is driven by general
economic trends, including changes in dis-
posable personal income, consumer confi-
dence, and consumer spending. During
periods of prosperity, for example, con-
sumers are more inclined to update their
wardrobes, buy the newest fashions on a
whim, or splurge on luxury items. During re-
MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY
cessions, consumers tend to shy away from
luxury goods, postpone apparel and footwear
purchases that are not absolutely necessary,
or replenish their wardrobes with inexpen-
sive items.
Demand also is driven by population
growth and economic trends. Obviously,
when the number of people rises, so does
overall demand for apparel and footwear.
However, with the US population growing
by only 1% per year, apparel and footwear
companies are looking overseas for growth
opportunities.
The economic growth will be particularly
dramatic in Asia. More than 600 million
14
people in East Asia will earn enough to be
considered middle class by 2030, up from
just more than 100 million in 2000, accord-
ing to the World Bank.
Demographic trends within the United
States also can affect the quantity and type of
apparel and footwear demanded by con-
sumers. For example, as the leading edge of
the baby boomer generation (those born be-
tween 1946 and 1964) enters retirement, these
consumers have shifted their spending priori-
ties to needs other than clothing, such as
healthcare. They are also more likely to buy
comfortable clothes and shoes rather than the
latest fashions. (For more on this topic, see the
“Industry Trends” section of this Survey.)
Changes in consumer attitudes and prefer-
ences also have an effect on demand for ap-
parel and footwear. Manufacturers must
adapt to lifestyle and fashion trends by alter-
ing their product lines. Many apparel manu-
facturers have added athletic styles to their
mix to accommodate consumers’ increasing
emphasis on fitness and exercise. Preteen and
teen markets tend to be particularly fashion-
driven, and apparel and footwear manufac-
turers have to closely monitor and anticipate
the ever-changing styles and items that these
consumers want.
Although the apparel and footwear indus-
tries are mature and slow growing, they exist
in a dynamic and competitive environment.
In order to improve profitability, many com-
panies are adopting new technologies while
restructuring to create leaner organizations.
Consolidation has been prevalent in these in-
dustries in the past few years, as larger com-
panies strive to lower their costs, by gaining
leverage in buying from suppliers and selling
to customers, and by achieving economies of
scale in manufacturing and marketing.
Components of the industries
The apparel and footwear industries are di-
verse, with hundreds of product lines designed
for men, women, and children in a wide
range of styles and price points. Each line is
designed specifically for a targeted consumer
group, based on its observed and expected
trends and needs.
Apparel
In the apparel industry, companies can
operate as manufacturers (wholesalers), as
apf_0507.qxp 5/14/2007 1:07 PM Page 15

US RESIDENT POPULATION PROJECTIONS Broad apparel categories include sports-

(In thousands)
wear, career apparel (comprising both tradi-
% CHANGE tional and casual styles), dress, and athletic
AGE GROUP 2007 2015 2025 2007–15 2007–25
apparel. Price points in the apparel industry
Under 5 yrs. 20,817 22,358 23,518 7.4 13.0 are (in ascending order) popular, moderate,
% of total 6.9 6.9 6.7
5 to 14 yrs. 40,113 42,607 46,051 6.2 14.8 better, bridge, and designer.
% of total 13.3 13.2 13.2 Fabrics play an important role in function
15 to 19 yrs. 21,655 20,243 22,457 (6.5) 3.7
% of total 7.2 6.3 6.4
and quality. In general, woolens and knits
20 to 24 yrs. 20,961 21,810 22,052 4.0 5.2 are high-quality fabrics that can command
% of total 7.0 6.8 6.3
higher selling prices. Woven fabrics tend to
25 to 34 yrs. 40,104 44,053 44,345 9.8 10.6
% of total 13.3 13.7 12.7 be lower in both quality and price.
35 to 44 yrs. 42,882 40,793 45,351 (4.9) 5.8 The women’s segment traditionally has
% of total 14.3 12.7 13.0
45 to 64 yrs. 76,533 83,711 82,141 9.4 7.3 accounted for more than half of all apparel
% of total 25.4 26.0 23.5 sales at retail. This segment’s share was
65 yrs. & over 37,850 46,791 63,524 23.6 67.8
% of total 12.6 14.5 18.2
54% in 2006, down from 56% in 2005,
Total population 300,913 322,366 349,439 7.1 16.1 according to NPD Fashionworld, a market
research and consulting firm. Men’s appar-
Racial composition (%): el represented 29% of retail apparel sales
White 79.8 78.4 76.8 in 2006, the same as 2005, while children’s
Black 13.0 13.3 13.7
Asian 4.4 5.0 5.7 (including infants’ and toddlers’) apparel
Other 2.8 3.3 3.8 accounted for 17% (versus 15%). Overall
Hispanic (any race) 14.7 16.6 18.9
apparel spending expanded by 5.1% to
Totals may not add due to rounding. $190.1 billion, according to NPD.
Source: US Department of Commerce, Population Series P-25.
Many traditional apparel vendors, aiming
to diversify their assortments, offer comple-
retailers, or as both. For instance, Gap mentary accessories like costume jewelry,
Inc., a vertical retailer, outsources the pro- handbags, hats, belts, watches, sunglasses,
duction of its apparel and accessories, scarves, and gloves. A smaller number of
which it then sells in its own stores. Some firms are niche players in the accessories
manufacturers, like Kellwood Co., sell al- market, targeting different price points. For
most exclusively to retail channels. Yet oth- example, Coach Inc. aims for the premium-
ers, like Quiksilver Inc., Jones Apparel priced segment, while Fossil Inc. and Claire’s
Group Inc., and Liz Claiborne Inc., distrib- Stores Inc. focus on the moderate- and popu-
ute their products through multiple chan- lar-priced markets, respectively.
nels, combining traditional retail channels
with their own retail stores. Footwear
An apparel manufacturer may sell its Footwear styles include athletic, casual,
products under its own brand name, a dress, sandal, and sport/hiking; however,
brand name that it has licensed from an- any given shoe design may combine cate-
other company, or as a private-label prod- gories. Footwear can be made out of

MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY

uct for a retail customer. Private-label
manufacturing not only provides an addi-
tional source of revenue for a manufactur-
er, but it also allows the manufacturer to
reduce the per-unit production costs of its
own branded goods by running plants at
greater capacity. Moreover, since the manu-
facturer does not have to support the mar-
keting of private-label goods, such items
can be almost as profitable as branded
products. However, it should be noted that,
due to increasing diversification of opera-
tions, the roles of apparel manufacturer, re-
tailer, brand manager, and licensee
continue to overlap and blur.
leather, canvas, or other materials that are
either natural or man-made. A footwear
manufacturer must determine what is most
important to its customers: fashion or func-
tion. Producers of athletic and sport/hiking
footwear also develop technology to im-
prove comfort and performance.
According to the NPD Group, total
footwear sales in the United States rose
4.6% in 2006 to $43.7 billion. Imports
from China accounted for about 86% of
pairs purchased in 2006, according to the
American Apparel & Footwear Associa-
tion, a trade group. Women’s shoes ac-
counted for 50% of the footwear market,

15
apf_0507.qxp 5/14/2007 1:07 PM Page 16
followed by men with 37% and children
with 13%.
Intense competition
Despite years of consolidation activity,
the apparel and footwear industries are ex-
tremely competitive and highly fragmented.
This is most likely due to the low barriers
to entry: one needs only good clothing de-
signs that attract department store and/or
specialty store buyers. If a designer gets or-
ders, he or she can contract the production
of the item to a low-cost, independent manu-
facturer, usually outside the United States. In
many areas, the barriers to entry are relatively
insignificant; these industries are characterized
by simple technologies, low fixed assets per
employee, and ease of expansion through the
use of contractors.
Although getting into the business may
be relatively painless, staying in is much
more difficult. Typically, small start-up
companies are undercapitalized and lack
broad-based global sourcing. In addition,
many do not have the technology and sys-
tems infrastructure now being demanded by
the major retailers. They also generally lack
marketing muscle to give their products the
exposure needed to build brand loyalty
among consumers. These small firms often
seek to be bought by larger companies as a
way to expand the sales of their designs.
The power of big retailers is a major
challenge to many manufacturers. As re-
tailers shrink their inventories and order
closer to the time that merchandise will be
needed, manufacturers are forced to assume
more inventory risk. In addition, their sheer
size puts big retailers in a strong position to
MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY
negotiate favorable terms with manufacturers,
with regard to pricing, shipping, co-advertising
(in which retailers and manufacturers share the
cost of advertising), and product labeling.
Consumers also wield considerable power
over apparel and footwear manufacturers, as
they can switch readily from one product or
brand to another. To dissuade them from do-
ing so, manufacturers attempt to raise brand
awareness and build brand loyalty among
consumers. A strong brand image typically
gives a manufacturer more pricing flexibility
by creating a “must-have” perception to the
consumer. Of course, some segments, such as
the popular-price segment, compete strictly
16
on price, in which case the consumer is likely
to purchase whichever product is the cheap-
est. Manufacturers in this segment must fo-
cus on obtaining low-cost manufacturing.
Manufacturing dynamics
Women’s garments tend to dominate sea-
sonal sales due to their higher fashion quo-
tient, which is hard to predict and, thus,
makes large-scale production needs hard to
anticipate. Generally, markets for men’s and
children’s clothing are less subject to change
from year to year and, therefore, are more
suited to large-scale production.
Not all apparel companies are engaged
directly in manufacturing. The three basic
types of apparel companies are manufactur-
ers, jobbers, and contractors.
Manufacturers perform the entire range
of production, from designing to finishing.
Jobbers design their own garments, ac-
quire the necessary fabric and related materi-
als, and arrange for the sale of the finished
product. However, they contract out most
production operations (that is, sewing and
finishing), with the exception of cutting.
Contractors receive already-cut garment
bundles from jobbers and process them into
finished garments.
Manufacturers can expand and contract
output readily by employing jobbers and con-
tractors. By doing business this way, manufac-
turers reduce the capital investment required
for expansion and avoid carrying the cost of
unused capacity during a contraction.
Manufacturing efficiency is critical to
the long-term success of apparel and
footwear companies. This efficiency shows
up in the gross profit margins on a compa-
ny’s income statement. Firms are in a con-
stant battle to lower their costs relative to
their competitors. There are several factors
involved in the cost basis of this industry,
including labor, raw materials, shipping
costs, import tariffs, and technological
advancements.
Cutting labor costs with offshore sourcing
US labor costs tend to be relatively high,
leading many manufacturers to turn to over-
seas sourcing for a majority of their prod-
ucts. Companies can establish overseas
production in three ways. They can buy or
build a plant, establish agents that have ties
apf_0507.qxp 5/14/2007 1:07 PM Page 17
with factories in the foreign country, or con-
tract directly with the owners of foreign fac-
tories. Typically, major US apparel and
footwear companies establish overseas pro-
duction in all of these ways. They also use do-
mestic sources other than their own plants.
Using overseas manufacturers and/or out-
side domestic contractors benefits apparel
companies in different ways. Overseas sourc-
ing allows them to compete with less expen-
sive imports. Domestic sourcing allows
companies to respond quickly to fashion
changes and to retailers’ needs for automatic
inventory replenishment.
Generally, US companies go to Southeast
Asia for production of more complicated ap-
parel items. Many of the region’s countries
have large pools of skilled laborers who can
create high-quality items. Although overseas
labor rates have risen in recent years, they
are still significantly below those in the Unit-
ed States.
Notwithstanding the advantages, curren-
cy fluctuations are a concern for overseas
manufacturing. At times, such fluctuations
can benefit the domestic industry; for in-
stance, when several Asian currencies de-
clined sharply in value versus the US dollar
in late 1997, manufacturing costs within
affected countries dropped for US compa-
nies. Conversely, when foreign currencies
unexpectedly appreciate against the US
dollar, as many have done lately, it raises
US manufacturers’ costs. Nonetheless,
overseas labor rates should remain signifi-
cantly below those in the United States.
Volatile raw materials costs
Apparel is made by cutting and sewing
woven and knit textile fabrics or by knitting
with yarn. Apparel companies are susceptible
to variations in commodity prices, especially
for cotton. In times of rising cotton prices,
profit margins will be squeezed unless other
cost-cutting measures can be implemented to
offset the increase in the price of raw materi-
als. For example, in 1995, the price of cotton
reached record highs, as crop failures in oth-
er parts of the world induced sellers of US-
grown cotton to export their product. At
that time, cotton imports to the United States
were still restricted by a federal law enacted
some 60 years earlier.
To compensate for commodity price
swings, companies can hedge their bets in the
cotton futures market. In recent years, how-
ever, cotton price fluctuations have moderat-
ed, thanks to a more open trade system.
Footwear companies are similarly affected
by fluctuations in the costs of their raw ma-
terials. Footwear is divided into three general
categories classified by material: leather, rub-
ber, and vinyl/plastic.
Reduced trade regulation
The shift of clothing jobs away from the
United States has accelerated in the last
decade with the expansion of free-trade
agreements. In 1995, the United States low-
ered tariffs on clothing imported from the
Caribbean and agreed to phase out the
Multi-Fiber Agreement, which imposed quo-
tas on imported clothing. When the North
American Free Trade Agreement (NAFTA)
went into effect on January 1, 1994, it al-
lowed US companies to ship fabric produced
in the United States to Mexico for assembly,
and to ship the clothing back to the United
States without incurring import duties.
Apparel products that are simpler to make
are outsourced to less developed countries,
where labor rates are lower than in South-
east Asia. With the passage of the Caribbean
Basin Trade Partnership Act (CBTPA) in
May 2000, a growing percentage of produc-
tion is being sourced in that region, which
offers the advantage of much shorter lead
times because of its proximity to the United
States. The African Growth and Opportunity
Act (AGOA), also passed in May 2000, fur-
ther promises to spur the level of apparel and
footwear imports from sub-Saharan Africa.
In October 2000, the Trade Development
Act (TDA) of 2000 took effect. The TDA
MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY
gives duty and quota preferences to many
countries in the Caribbean and in sub-Saharan
Africa that export apparel to the United
States, provided the goods meet certain con-
tent conditions. For the most part, apparel
produced in these regions must include fabric
made in the United States. As a result of the
TDA, apparel imports from these regions are
expected to grow faster than they would
have without the special legislation. In July
2002, Congress granted final approval for
the Trade Promotion Authority (TPA) that
revives presidential “fast-track” authority to
negotiate trade deals that Congress can ac-
cept or reject but not alter. Such deals may
17
apf_0507.qxp 5/14/2007 1:07 PM Page 18
include provisions to eliminate apparel duties
for Andean countries (Bolivia, Colombia,
Ecuador, and Peru), the Caribbean Basin,
and sub-Saharan Africa.
In May 2004, the US Central American
Free Trade Agreement (CAFTA) was signed
with Costa Rica, El Salvador, Guatemala,
Honduras, and Nicaragua. It will eliminate
tariffs and trade barriers between the United
States and those countries for many prod-
ucts, including apparel. The Senate Finance
Committee endorsed CAFTA on June 29,
2005, and the measure narrowly passed the
House of Representatives in July.
The bilateral Free Trade Agreement (FTA)
between the United States and Chile became
effective on January 1, 2004. It eliminated
tariffs on 87% of bilateral trade immediately,
and it will establish duty-free trade in all
products within 12 years. An agreement with
Australia that was completed in May 2004
could serve as a model for the Asia-Pacific
region. Other talks are progressing under the
auspices of the World Trade Organization.
China joined the World Trade Organization
in December 2001. Exports of clothing and
shoes from China jumped after the elimina-
tion of quotas among all WTO-member
countries in 2005. China’s share of the ap-
parel imported into the United States nearly
doubled to 25.9% in 2006, according to the
American Apparel & Footwear Organiza-
tion. China is even more dominant in
footwear, being responsible for 86.2% of all
US imports in 2006.
Vital role of technology
In both the apparel and footwear indus-
tries, technological innovations have facilitat-
MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY
ed global expansion and closer coordination
between retailers and manufacturers while
also cutting costs. For example, improve-
ments in manufacturing processes — such as
efficiencies in cut-and-sew operations in the
apparel industry — are helping to reduce
manual labor costs.
Rapid improvements in computer technol-
ogy have helped to shorten the new product
development phase from years to practically
months, especially in the fashion/style/high-
performance areas. In the athletic footwear
industry, for example, computer-aided design
(CAD) systems enable a manufacturer to re-
duce the design-to-production cycle to only a
18
few months, so footwear companies can pro-
vide the marketplace with a steady flow of
new products.
Apparel makers who are linked with re-
tailers through quick-response programs and
other electronic technologies go a long way
toward making themselves indispensable to
their customers. The goal of quick response
is to maintain lean inventories and avoid
overstocking, while ensuring that retailers
have the merchandise customers want to buy,
when they want to buy it. By assuming re-
sponsibility for stocking the stores, apparel
companies help to carry inventory costs, his-
torically one of retailers’ highest costs. They
also alleviate many of the retailers’ reorder-
ing headaches and help them buy as close to
the selling season as possible. For manufac-
turers today, quick response has become key
to survival.
One such system to link retailers and
manufacturers is called electronic data inter-
change (EDI). An EDI system employs inter-
connected computer terminals throughout
the entire manufacturing and sales systems.
At the retailer’s checkout counter, electronic
point-of-sale scanners read the bar code at-
tached to each item and record the product
sold, its price, and even such details as its
color and size. This up-to-the-minute report
on a given store’s sales is then relayed to the
manufacturer.
With direct access to detailed sales infor-
mation, the manufacturer can tailor its pro-
duction to consumer demand. The data
recorded by bar code scanners in the EDI sys-
tem also are used for automatic (or just-in-
time) reordering, enabling a manufacturer to
restock a retailer’s shelves quickly, using no
more than a computer for communication. In
addition to providing for automatic replen-
ishment, EDI makes distribution and shipping
information processing more efficient.
Quick response and EDI technologies
have proven successful with basic goods,
which are relatively simple to produce, re-
quire shorter lead times, and increasingly are
being manufactured in highly automated fac-
tories in the United States. These systems are
more difficult to implement for seasonal and
fashion apparel, however, as such goods re-
quire more labor input and tend to be made
in the Caribbean or Southeast Asia.
Technology also is playing a crucial role
in apparel procurement (or reverse auctions)
apf_0507.qxp 5/14/2007 1:07 PM Page 19
through the rising popularity of business-to-
business (B2B) exchanges — online market-
places that allow trading partners to conduct
real-time business communications with each
other. This is changing the way retailers and
vendors conduct business with each other,
whether they are issuing requests for quotes,
bidding for orders, sharing product forecasts,
or collaborating on product development.
These exchanges may be public, such as the
GlobalNetXchange (GNX) and the World-
Wide Retail Exchange (WWRE), or private,
such as Wal-Mart Stores Inc.’s Retail Link
and other portals that individual retailers,
brands, and trading companies have estab-
lished for B2B communications with their
own networks of customers and suppliers.
Sales channels proliferate
Today, most companies distribute their
products through a variety of channels:
wholesale, catalog, and Internet sales, as well
as through their own retail stores. Within the
wholesale channel, manufacturers often try
to sell to various types of retailers, including
department stores, specialty stores, discount
stores, and national chains.
For retailers, expanding their number of
outlets, both domestically and international-
ly, is a way to diversify risk while also lever-
aging efficiencies across a greater number of
stores and products. To increase store traffic
and the average ticket, retailers are remodel-
ing or converting existing locations to im-
prove the shopping experience.
In the past decade, many manufacturers
have opened their own retail stores, reducing
their dependence on retailers while potentially
increasing sales. This also permits manufactur-
ers to showcase an entire line of products, en-
hance brand awareness, test new products, and
directly collect customer feedback. However, it
also carries the risk of alienating retailers who
carry the same merchandise. Some manufactur-
ers have also established outlet stores to move
older inventory. For instance, Liz Claiborne
operated 399 specialty retail stores and 336
outlet stores as of December 30, 2006.
Specialty retailers most important for apparel
and footwear
Consumers buy apparel and footwear
from a variety of retail outlets. Based on
data from the NPD Group, a market re-
search firm, specialty stores accounted for
30.8% of apparel dollar purchases by con-
sumers in 2006, followed by mass mer-
chants (19.9%), department stores (16.2%),
national chains (14.6%), off-price retailers
(7.5%), direct mail/e-tail pure plays (5.1%),
factory outlets (1.7%), and all other retail-
ers (4.2%). (“All other retailers” is a cate-
gory consisting of warehouse stores, dollar
stores, company stores, and miscellaneous
retail outlets.)
In the footwear industry, discount
stores/mass merchants are the single largest
venue for footwear sales, according to the
NPD Group, representing 31% of dollar vol-
ume in the fourth quarter of 2006 and 15%
of units sold. Specialty stores (apparel spe-
cialty, athletic footwear specialty, shoe stores,
shoe chains, and sporting goods stores),
though reported separately by the NPD
Group, are a significant factor when added
together, accounting for 37% of footwear
dollar sales in 2006 and 29% of units sold.
Department stores had 13% of dollar sales
(8% of unit volume) in the fourth quarter of
2006, while national chains had 8% (9%).
Other retailers (off-price, catalog/direct mail,
factory outlets, online/Internet, pro shops,
warehouse clubs, and other) accounted for
the balance of sales.
Differences exist in the distribution mix
for men’s, women’s, and children’s items. For
example, more women’s apparel than men’s
is purchased in specialty and department
stores. Men’s apparel is more prevalent in
discount stores and general merchandise
chains. In the children’s segment, a consider-
ably higher portion of apparel is purchased
in discount stores. Because children quickly
outgrow their clothing, parents are less in-
MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY
clined to spend a lot of money on a single
item and, therefore, more inclined to shop at
discount stores.
Fashion is increasingly responsive to the
styles sought by the preteen and teen mar-
kets, whose influence is rising. When pro-
moting a product, however, manufacturers
and retailers must not only take the user into
account, but the shopper as well. For exam-
ple, many men’s apparel items actually are
purchased by women.
Direct to consumer: Internet and catalog
Although the Internet accounted for
about 6.5% of total apparel, footwear, and
19
apf_0507.qxp 5/14/2007 1:07 PM Page 20
accessories sales in 2006, according to re-
search firm Forrester Research, we believe
that it has strong potential for growth as a
distribution channel. The Internet permits
consumers to shop from anywhere at any
time they wish and to make easy price com-
parisons, conveniences that shoppers seem
to appreciate. Manufacturers use Internet
sites for marketing and informational pur-
poses, as well as to make sales. The Inter-
net enables apparel and footwear brands to
customize merchandise to shoppers’ specific
needs, which enables firms to achieve better
pricing along with developing a more emo-
tional bond with the consumer. Both Nike
Inc. and Polo Ralph Lauren are at the fore-
front in this functionality.
Selling by catalog is another important
method of distribution. Before the advent of
the Internet, it was the primary way to shop
at home. Today, however, most retail apparel
brands combine catalog sales with e-commerce
sales under the moniker “direct to consumer.”
This is part of an overall branding strategy
to meet consumers’ needs 24/7 and, thereby,
strengthen the emotional bond that is part of
the branding experience. Catalogs are a form
of advertising or direct marketing, bringing
the product to the consumer. Many retailers
report that receipt of the catalog spurs
shoppers to the Internet or the store for the
purchase occasion.
Enhancing customer loyalty
Apparel and footwear manufacturers go
to great lengths to attract new customers and
retain existing ones. In a market that bom-
bards consumers with advertising campaigns,
and lifestyle and fashion messages, a brand
MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY
name is a powerful weapon in these efforts.
Brands have become increasingly signifi-
cant to apparel and footwear sales. Many
consumers have less time to shop than previ-
ously, and they are spending their disposable
income more carefully. Established brand
names, conveying an image of quality, make
shopping easier and faster for many con-
sumers. For manufacturers, brands build
consumer loyalty, which translates into re-
peat business.
Many established brand manufacturers,
such as Tommy Hilfiger, Polo Ralph Lauren
Corp., Jones Apparel Group, and Liz Clai-
borne, are leveraging their existing brand
20
names by adding accessory lines, such as
sunglasses, watches, fragrances, wallets, and
footwear. Some apparel makers, such as
Polo Ralph Lauren, even have ventured into
home furnishings, adding branded linens
and dinnerware. Footwear manufacturers,
too, have capitalized on the strength of their
brand names, with companies such as Nike
and Reebok International Ltd. adding ap-
parel, accessories, and sports gear to their
product portfolios.
Licensing is a common means for compa-
nies to extend their product lines; manufac-
turers paid $5.9 billion in licensing royalties
in the US in 2005 (latest available) up 1.8%
from 2004, according to the International
Licensing Industry Merchandisers’ Associa-
tion. Entertainment/character licensing con-
tinued to garner the largest share of the
market, accounting for $2.62 billion, or 44%
of the total, while trademarks/brands was
second with $1.08 billion.
Licensing is a key element of an integrated
brand marketing program, enabling a com-
pany to extend its brand into totally new
categories. For instance, in March 2003,
Liz Claiborne licensed certain women’s
dresses and suits under its Liz Claiborne,
Liz Claiborne Woman, and Liz Claiborne
Petites labels to apparel manufacturer Kell-
wood Co. More recently, bootmaker Timber-
land Co. in February 2006 licensed its brand
name to Phillips Van-Heusen to make Tim-
berland apparel in North America.
Manufacturers must support their brands
through advertising campaigns and by de-
livering the right product in an appropriate
retail setting. They also must establish and
maintain good relationships with retailers
and help them to effectively present and sell
their goods. Some manufacturers supply re-
tailers with an in-store shop — from con-
cept to display, including fixtures — which
allow the retailer to create an environment
consistent with the brand’s image. It also
increases consumer product recognition
and loyalty as customers become familiar
with a product’s in-store presentation and
location.
A manufacturer’s merchandising team
usually utilizes consumer focus groups to
provide customer feedback on the company’s
products or to generate new product ideas.
This information is shared with designers
and the production staff. The merchandising
apf_0507.qxp 5/14/2007 1:07 PM Page 21
INVENTORY/SALES RATIO — RETAIL APPAREL
2.8
2.7
2.6
2.5
2.4
2.3
2.2
1997 98 99 00 01 02 03 04
Source: US Department of Commerce.
team also will educate the retailer on the
company’s new products and servicing of
customers. Increasingly, manufacturers will
open a few retail stores as a way to test their
products and gain direct feedback from their
end customers. An example is VF Corp.,
which has opened North Face stores in sever-
al cities, partly to gauge customer reaction to
new products for this outdoor apparel and
gear brand.
KEY INDUSTRY RATIOS
AND STATISTICS

Gross domestic product (GDP). Re-
ported quarterly by the US Department of
Commerce, GDP tracks the market value of
all goods and services produced by labor and
capital in the United States; it is, thus, the
broadest measure of aggregate economic ac-
tivity. As the economy expands and contracts
with the business cycle, economic growth is
measured by changes in inflation-adjusted
(or real) GDP. Two consecutive quarters of
decline in real GDP generally signal that the
economy is in a recession.
GDP rose 4.2% in 2004, 3.5% in 2005
and 3.3% in 2006. As of April 2007, Stan-
dard & Poor’s was projecting a 2.4% in-
crease in real GDP for 2007, followed by a
2.8% gain in 2008.

Real disposable personal income. This
measure of consumers’ after-tax personal
income, adjusted for inflation, is reported
each month by the Department of Com-
merce. Disposable income influences the
level of expected consumer spending. When
incomes are rising, consumers are willing to
spend more than previously, which bodes
well for apparel and footwear sales. Con-
versely, when incomes are declining, con-
sumers are more likely to defer spending
and save their money.
In 2006, disposable personal income rose
5.4%, following increases of 4.3% in 2005
and 6.1% in 2004. As of April 2007, Stan-
dard & Poor’s was projecting that disposable
income would increase 5.4% in 2007 and
5.3% in 2008.
05 06 2007

Consumer confidence. The Conference
Board, a private research organization, con-
ducts a monthly poll of 5,000 representative
US households to gauge consumer sentiment,
and it compiles an index of consumer confi-
dence based on the results. The index repre-
sents a relative measure of how Americans
feel about the strength of the economy, busi-
ness trends, their job security or employment
prospects, and their future earning prospects.
High consumer confidence usually is accom-
panied by increased spending and borrowing.
Conversely, when consumer confidence is low
(usually due to uncertainty about the future),
personal expenditures are likely to be cut
back or postponed. Because consumer spend-
ing accounts for about two-thirds of the na-
tion’s economic activity, this measure is
widely watched.
In 2003, the Conference Board’s index
of consumer confidence fell to 61.4 in
March — its lowest level since October
1993 (when it was 60.5) — largely reflect-
ing consumer concern over the US war
with Iraq. The most recent reading was
107.2 (1985=100) in March 2007, down
from 112.2 in February.
MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY

Consumer price index (CPI). Released
monthly by the Bureau of Labor Statistics
(BLS), this index measures changes in the
prices of commodities, fuel oil, electricity,
utilities, telephone services, food, and ener-
gy. The “core” CPI smoothes out the index
by removing the volatile food and energy
categories. The BLS also releases specific
price indices for both the apparel and
footwear industries.
These inflation rates reflect and influence
pricing decisions of apparel and footwear
companies and their suppliers. Most compa-
nies try to pass on cost increases to the con-
sumer. When these increases are large,
21
apf_0507.qxp 5/14/2007 1:07 PM Page 22
however, consumers, stunned by high prices,
may hold back on spending — a condition
known as “sticker shock.”
While prices for many products and services
tend to rise over time, that trend does not hold
for apparel, for which prices have fallen annu-
ally from 1998 through 2005. In 2006, apparel
prices, as measured by the CPI-Apparel index,
were unchanged at 119.5. Through February
2007, the index was 122.582, up less than 1%
from March 2006.
As of March 2007, Standard & Poor’s
was projecting overall inflation, as measured
by the CPI, at 2.0% for full-year 2007 and
2.0% for 2008. CPI increased 3.2% in 2006.

Interest rates. The level of interest rates
influences management decisions regarding
business acquisitions, new product introduc-
tions, capital expenditures, dividends, and
stock repurchases. High or rising interest rates
increase the cost of borrowing, making compa-
nies less likely to expand facilities or to make
other capital expenditures. During such times,
apparel and footwear manufacturers may post-
pone or cancel plans to upgrade or expand
manufacturing capacity. The level of interest
rates also affects consumers’ purchasing deci-
sions. Higher interest rates can curb consumer
spending, as people begin to pay down their
credit cards and rein in their expenses.
The Federal Reserve Board (the Fed) sets
monetary policy and can take actions that di-
rectly affect short-term interest rates in the
US banking system. After slashing short-term
interest rates 11 times during 2001 to prop
up a recessionary economy, the Fed did not
change rates until November 6, 2002, when
MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY
APPAREL STORE VS. DEPARTMENT STORE SALES
(In billions of dollars)
180
Discount Conventional and national
160 department stores chain department stores
Apparel stores
140
120
100
80
60
40
20
0
1994 95 96 97 98 99 00 01 02 03 04 05
Source: US Department of Commerce.
22
it lowered both the discount and the fed
funds rates by 50 basis points to 0.75% and
1.25%, respectively, in response to the slug-
gish economic recovery. The federal funds
rate was last lowered in June 2003, to
1.00% from 1.25%.
By mid-2004, with output expanding
and payrolls growing, the question was
when the Fed would raise rates. A cycle of
rate hikes began in late June 2004, with a
25-basis-point increase to 1.25%. By Octo-
ber 2006, the Fed had raised the federal
funds rate a total of 17 times to 5.25%.
Despite these recent increases, interest rates
today remain low on an historical basis,
and particularly so compared with rates in
the late 1970s and 1980s.
As of April 2007, Standard & Poor’s was
projecting the interest rate on Treasury bills
(a proxy for short-term interest rates) to av-
erage 5.0% in 2007 and 4.5% in 2008. The
rate was 4.7% in 2006. We project that the
yield on 10-year notes (a proxy for long-term
interest rates), which was 4.8% in 2006, will
remain at 4.8% in 2006 and then rise to
5.0%in 2008. Our projection for the Fed
funds rate is 5.0% in 2007.
HOW TO ANALYZE AN APPAREL OR
FOOTWEAR COMPANY
A good starting point for analyzing an ap-
parel or footwear company is to assess the cur-
rent macroeconomic environment, with
emphasis on trends in employment, and con-
sumer income and spending. The state of the
general economy, and consumer income and
spending in particular, can influence the
amount of money consumers are willing or
able to spend on clothing and footwear. Demo-
graphic and lifestyle trends also can be impor-
tant determinants of consumer demand.
Some questions to ask include: Is the
economy growing, or is it headed for a reces-
sion? Are new jobs being created, at what
pace, and what trend is apparent in the un-
employment rate? Changes in trend can be
more meaningful than an absolute number.
Are consumer spending and overall retail
sales contracting or expanding? Are con-
sumer incomes rising? Are consumer debt
2006 levels too high relative to income? Are con-
sumers spending more or less on apparel and
footwear relative to other goods? Are appar-
apf_0507.qxp 5/14/2007 1:07 PM Page 23
el and footwear prices rising or falling rela-
tive to other discretionary goods? What are
the dominant fashion trends in the apparel
and footwear industries? How are the na-
tion’s changing demographics influencing de-
mand for apparel, accessories, and footwear?
Once the industry’s outlook has been
evaluated, the analyst then can evaluate the
prospects of a specific company.
Qualitative factors
Analysts evaluating an apparel or
footwear manufacturer have the added ad-
vantages of being able to test merchandise
quality, compare it with alternatives, and as-
sess the selling environment in terms of cus-
tomer service and visual accoutrements.
When visiting a retail location, things to note
include how much square footage a store de-
votes to selling particular products compared
with its competitors, whether merchandise
appears to be selling at full or discounted
prices, merchandise display formats, how
complete or broken collections appear, over-
all traffic trends, and the average age of the
typical shopper. Depending on distribution
channel, one also should observe the degree
of merchandise differentiation from compet-
ing products.
The following discussion explains several
qualitative factors used to analyze an apparel
or footwear manufacturer.
Evaluating a company’s competitive stance
Because of the glut of apparel and
footwear product offerings in the market,
any characteristic that favorably distinguish-
es a company and its products gives it a
competitive advantage in the marketplace.
Such traits can include the following:
◆ Brand names. In the apparel and
footwear industries, having a strong and rec-
ognizable brand name is the key to success.
Through marketing efforts, companies try to
create a well-known brand name that con-
sumers automatically identify with a high-
quality or fashionable product.
Brand loyalty cannot be established
overnight, however. Companies generally
spend a lot of time and money on advertising
and promoting brand awareness. For exam-
ple, through meticulous positioning and ag-
gressive promotional support over the years,
Quiksilver Inc. has transformed from a niche
board shorts brand into a leader in the
youth-oriented, casual-lifestyle apparel and
accessories segment.
◆ Product differentiation. A company
also can create a competitive advantage by
differentiating its product line from that of
its competitors. In reality, a company actual-
ly does not have to create a markedly differ-
ent product, but it must create a perception
of difference. In this way, it can charge high-
er prices and generate brand loyalty among
consumers. This practice is gaining in impor-
tance as basic merchandise becomes increas-
ingly indistinguishable to consumers.
Companies can cultivate an aura of differ-
ence through marketing, whereby a brand
image is created through advertising. For ex-
ample, while Liz Claiborne Inc.’s Juicy
Couture’s terry warm-up suits are similar to
other makes, the company’s marketing has
helped to differentiate its brand, creating
strong demand for its goods.
◆ Distribution. What channels of distrib-
ution does the company use — does it sell its
products through its own retail chain, or
through mail-order catalogs, department
stores, specialty chains, off-price outlets, the
Internet, or other methods? Has it recently
expanded or narrowed its distribution sys-
tem? On the other hand, if it has consolidat-
ed its distribution infrastructure, has it
realized any operating synergies by doing so?
Expanding the channels of distribution
can reduce an apparel or footwear manufac-
turer’s reliance on any particular channel. If
a company’s profitability is showing improve-
ment over time, it would appear to have cho-
MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY
sen the right channels of distribution. Of
course, no company should feel obligated to
sell through every type of outlet. Channels
must be chosen with some thought to the
targeted consumer groups, and desired price
points and brand images. For example, a
company trying to sell first-quality designer
clothes in a mass-market outlet could dilute
its brand irreparably.
◆ New product development. For
footwear companies, new products are cru-
cial to drive growth in the short run. De-
mand for nonathletic footwear and some
outdoor footwear, particularly those made of
23
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leather, is driven by a combination of looks
and comfort. Manufacturers must try to
bring a steady stream of products to market,
while balancing these factors according to
consumers’ tastes. In the athletic footwear
segment, new product development centers
mainly on technology, with manufacturers
aiming their extensive research and develop-
ment efforts at improving the performance
and endurance of athletic sneakers.
For apparel, sales drivers are new fash-
ion trends and new fabrications, which
may meet consumers’ needs better than exist-
ing designs.
Long-term product development is also
important. Apparel companies often try to
expand their potential market by offering
new categories such as petites or children’s
wear; by entering into other lines of appar-
el, like sportswear or performance apparel;
or by extending their brand names into
nonapparel product categories, such as ac-
cessories, handbags, and costume jewelry.
Product development cycles can benefit if
fashion trends are correctly anticipated,
such as a shift from youth-inspired fashions
to more conservative looks.
◆ Manufacturing costs. A company can
control manufacturing costs in a number of
ways. It may purchase newer, more effi-
cient machines, improve factory floor lay-
out, use machine time more productively,
deploy just-in-time labor, reduce overtime
wages, seek sources of lower-cost materi-
als, and/or improve product design.
Most domestic apparel and footwear com-
panies manufacture products in low-labor-
cost countries outside the United States and
Western Europe. Labor costs are significant-
MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY
ly lower in the Far East (including China),
the Caribbean basin, and Latin America, as
well as in other less industrialized regions.
Moreover, the majority of the larger domes-
tic industry participants are not involved in
manufacturing, but rather source their mer-
chandise in the aforementioned locales by
developing strategic relationships with gar-
ment and footwear factories.
Being the industry’s low-cost provider
gives a company a powerful competitive ad-
vantage. A low-cost provider is able to re-
duce its sales prices on merchandise to gain
market share, while still maintaining healthy
profit margins. However, to remain competi-
24
tive, a cost-focused operator must achieve a
certain amount of differentiation parity, and
the quality of its products must compare fa-
vorably to those of its competitors.
◆ Customer demographics. It is impor-
tant to identify the firm’s target customers
and assess whether the company is success-
fully addressing their needs and wants
from both a marketing and design stand-
point. If the firm targets a narrow demo-
graphic group, such as senior citizens or
teenagers, it is also crucial to evaluate the
ramifications of expected changes in the
segment’s population growth.
At the same time, attempting to be all
things to all people can alienate a compa-
ny’s traditional customer constituency and
lead to fashion misses. Gap Inc. discovered
as much in 2001, when its merchandise
strategy incorporated a significantly higher
fashion quotient. By fiscal year 2004 (ended
January) the company had corrected the
merchandise mix, reestablished a connection
with its customers, and restored store traffic
and profitability, albeit briefly. Beginning in
the second half of fiscal year 2005 and con-
tinuing through February 2007, Gap’s same
store sales (sales at units open more than
one year) were flat or negative, and the
company is again reevaluating its brand po-
sitioning and target audience.
Assessing management
In the apparel and footwear business, as
in most industries, a company with a superi-
or management team can distinguish itself
from its peers by creating successful competi-
tive strategies. The history of a management
team reflects its ability to recognize, analyze,
and act on market opportunities.
Questions to ask when evaluating man-
agement’s proficiency include: What is
management’s financial and operating philoso-
phy? How long have the senior managers
been with the company? What are the man-
agers’ track records, both individually and
working as a team? Has the company been
adept at integrating acquisitions? If managers
have taken control recently, what was their
previous experience? Do their growth strate-
gies make sense in light of the current envi-
ronment and the company’s particular
situation? Are management’s interests aligned
with those of its shareholders?
apf_0507.qxp 5/14/2007 1:07 PM Page 25
In the apparel and footwear industries, in
addition to top management, the company’s
lead designers, and its merchandising and pro-
curement officers, also should be evaluated.
Quantitative factors
After getting a grasp on the company’s
competitive position, the next step is to ana-
lyze its financial statements — the income
statement, the balance sheet, the statement of
cash flows, and various components of each.
Although these are three separate financial
statements, they are very much interrelated
and need to be analyzed together. The ana-
lyst should also scrutinize the company’s
earnings quality.
Income statement
The income statement records the finan-
cial operations of a firm over a given time
period. Among the major items on an ap-
parel or footwear company’s income state-
ment that the analyst should examine are
trends in revenues, gross profit margin,
and operating margin.
◆ Revenues or sales. As in most other in-
dustries, an income statement analysis for
apparel and footwear companies begins
with the top line: sales. Obviously, revenue
growth is a good thing, but it is also relative.
A company’s sales growth should be com-
pared with that of its competitors and the
overall market. It is also important to deter-
mine what is driving any sales growth. Is it
pricing, volume gains, or acquisitions? Is the
sales growth broad-based or driven by only a
few categories? Is the company gaining mar-
ket share or just riding the market’s overall
growth? All things being equal, a more
conservative revenue recognition policy is
desirable. With apparel and footwear man-
ufacturers, any trends in discounts and al-
lowances given to retailers also should be
considered.
◆ Gross profit margin. A company’s gross
margin is calculated as net sales minus the
cost of goods sold, expressed as a percentage
of gross sales. It generally reflects a compa-
ny’s sales volumes, product mix, pricing,
sourcing, and operational (including manu-
facturing) efficiency. The cost-of-goods-sold
line may comprise a number of items other
CONSUMER CONFIDENCE INDEX
(1985 = 100)
160
140
120
100
80
60
40
1995 96 97 98 99 00 01 02 03 04 05 06 2007
Source: The Conference Board.
than merchandise, including costs of pur-
chasing, warehousing, distribution, freight,
occupancy, and insurance.
Gross margin should be evaluated on both
an absolute basis and a relative basis. If a
company’s gross margin is high compared
with its peers, the company may possess a
competitive advantage.
An analyst also should look for trends in
gross margin. Are any industrywide factors,
such as overcapacity, cutting into gross mar-
gins? Excessive merchandise inventories and
competitive pressures tend to induce a higher
level of promotional selling and markdowns,
which, in turn, will reduce gross margins.
Conversely, does a particular company have
a product in high demand, allowing it to
charge a premium price as demand exceeds
supply? If possible, determine what is caus-
ing fluctuations in gross margin and whether
those trends will persist.
For manufacturers that operate company-
owned retail stores, comparable-store sales
can explain gross margin trends. Other rele-
vant indicators for apparel and footwear
MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY
companies include average selling prices
(ASPs), initial markups (IMUs), units per
transaction (UPT), average ticket (AT), and
inventory turns (discussed later).
◆ Operating profit margin. This figure
is derived by dividing the operating profit
(gross profit minus selling, general, and ad-
ministrative expenses) by sales revenues.
The operating margin indicates the efficiency
and profitability of the entire enterprise —
not just the manufacturing operations, but
also the corporate, selling, and distribution
operations. Nonrecurring items should be
excluded from margin calculations to give
25
apf_0507.qxp 5/14/2007 1:07 PM Page 26
the analyst a baseline for comparing results
going forward.
Because the operating margin reflects
costs that can be managed to some degree
(salaries, commissions, advertising, and so
forth), it usually is easier to control than
the gross margin. The company may derive
a certain degree of expense leverage from
increased activity levels, thereby improving
operating margins. Consequently, an in-
crease in the operating margin typically in-
dicates that management is using its
resources more efficiently, allowing fixed
costs to be spread across greater volumes.
On the other hand, a trend of narrowing
operating margins may be a warning sign
that management is not operating at its
most efficient level.
Balance sheet
The balance sheet reports major cate-
gories and the stated values of assets, lia-
bilities, and stockholder’s equity at a
specific point in time.
◆ Cash and equivalents. A company’s
cash position needs to be analyzed concur-
rently with its ability to generate cash. If a
company continually operates with net cash
outflows because of working capital needs
and capital spending, one should look at the
level of cash and marketable securities on the
balance sheet to determine how long the
company can fund operations before it will
need to tap the capital markets.
◆ Inventory. Inventory management is
crucial to retailers and manufacturers alike.
They must have the right products on hand
in the right amounts; failure to do so could
MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY
lead to fashion misses or being caught short
during an important selling season. Having
too much inventory raises costs and ties up
capital. It also may signal impending gross
margin declines, in cases where the products
must be discounted in order to sell them be-
fore they go out of style.
Inventory levels are generally available
from a company’s balance sheet. The effec-
tiveness of inventory management can be
measured by the inventory turnover ratio.
This ratio, calculated by dividing the cost
of goods sold by its average inventory,
should be reviewed for trends and com-
pared with peer averages.
26
Inventory turnover ratios for apparel
and footwear companies, while generally
comparable, could vary widely from com-
pany to company. A high turnover rate in-
dicates that goods are selling well relative
to the average amount of inventory kept in
stock. Conversely, a low turnover rate indi-
cates that goods are not moving rapidly. In-
ventory buildup is less of a concern for
basic merchandise, which can be sold
throughout the year, than it is for fashion-
oriented products.
Statement of cash flows
It is necessary to estimate cash inflows (or
sources) and outflows (uses) to determine the
net cash flow generated (or used) by a com-
pany’s operations. How does the company
plan to raise and utilize its cash? The cash
flow statement has three sections: operating,
investing, and financing.
The operating section reflects cash gen-
erated from, or used in, operations, after
adjusting for noncash items (such as depre-
ciation and amortization), and including
changes in working capital components. For
example, if a manufacturer anticipates higher
sales from seasonal activity, it may need cash
to build inventory levels.
The investing and financing sections cap-
ture other sources and uses of cash outside the
company’s operations. Possible sources include
the issuance of debt, or equity capital and divi-
dends received from affiliated companies. Po-
tential uses include repurchasing shares of
common stock, paying dividends, reducing
debt, or reinvesting in the business via either
capital expenditures or acquisitions.
Other factors
In addition to the income statement and
balance sheet items outlined earlier, several
other factors are important to consider when
analyzing an apparel or footwear company.
A company’s order backlog indicates what
its sales will be like over the next few months.
Although this information is not included in
the financial statements, some apparel and
footwear companies report it separately.
Certain companies in the athletic footwear
and apparel segment report worldwide “fu-
tures orders.” This measure covers products
scheduled for delivery between certain dates,
usually over the next three to six months, and
apf_0507.qxp 5/14/2007 1:07 PM Page 27
S&P Ratings Services View:
Evaluating an apparel company’s
creditworthiness
When assigning corporate credit ratings,
Standard & Poor’s analyzes a company’s business risk
and financial risk separately. The ultimate corporate
credit rating — our assessment of a company’s over-
all creditworthiness — incorporates both risk profiles.
It is important to note that a company’s business risk
determines the level of financial risk that can be sus-
tained for any rating category.
Standard & Poor’s universe of rated apparel
companies is diverse: it includes both public and
private companies, with ratings ranging from ‘A+’
to ‘B’ as of April 2007.
Business risk
The analysis of a company’s business risk be-
gins with an assessment of industry characteris-
is another way to project revenues. In the ap-
parel industry, deliveries scheduled for future
seasons are reported as “bookings.”
Corporate governance
Before the scandals at Enron Corp.,
WorldCom Inc., and Parmalat Finanziaria
SpA, corporate governance (CG) was
viewed simply as the system by which com-
panies are directed and controlled. In the
aftermath of a series of corporate collaps-
es, however, the global consensus on CG
has broadened. In the largest sense, CG ad-
dresses the guiding principles that form the
basis for managing a company, incorporat-
ing values of transparency, accountability,
integrity, and responsibility towards maxi-
mizing shareholder value. Governance as-
sessments are extending even further to the
field of corporate responsibility in a proac-
tive and preventative strategy.
The Organisation for Economic Co-opera-
tion and Development (OECD) defines corpo-
rate governance as the system by which
business corporations are directed and con-
trolled, the distribution of rights and responsi-
bilities among different participants in the
corporation (such as the board, managers,
shareholders and other stakeholders), and
spells out the rules and procedures for making
decisions about corporate affairs.
tics, including the competitive landscape and the
company’s position within the industry. Other impor-
tant factors to assess include the size and diversi-
ty of the company’s revenue base, its customer and
geographic diversification, its brand equity and rel-
evance, profitability and peer group comparisons,
and the strategic and operational competence of
management.
◆ Industry risk. The industry risk for the do-
mestic apparel industry is viewed as weak: the in-
dustry is mature, highly competitive, and cyclical.
Sales are influenced by consumer sentiment and
disposable income.
The retail environment has remained challenging in
a number of ways. Retailer consolidation has concen-
trated purchasing power of the remaining companies.
In addition, the lack of merchandise differentiation and
the saturation of retail outlets have led to promotional
We take it to mean, at the very least, that
boardroom compensation is linked to perfor-
mance, directors are of high caliber, and audi-
tors are independent. CG typically addresses
risk management and internal controls, corpo-
rate culture, stewardship and accountability,
board operations and composition, and the
monitoring and evaluation of activities.
Additionally, the growing importance of
intangible assets (such as brand value or cor-
porate reputation) and their effect on market
capitalization suggests that potential legal
penalties pale in comparison to the risk of a
plummeting share price. For consumer prod-
uct companies in particular, the relationship
between good CG and corporate social re-
MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY
sponsibility (CSR) are intertwined: accusa-
tions of sweatshops and child labor have
resulted in consumer boycotts and loss of
brand equity, along with a decline in share
price. Therefore, we see the best CG efforts
including supply chain alignment with CSR
in order to avoid guilt by association.
Many large institutional investors are in-
corporating the assessment of CG into their
investment decisions in the belief that com-
pliance with CG initiatives will reduce a
company’s cost of capital and lower its risk
profile, as well as deliver sustainable share-
holder value. ■
27
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pricing and margin pressures. In this environment, own-
ing premium brands and maintaining customer rele-
vance have become very important competitive
advantages for apparel firms.
◆ Diversification. Diversity of revenue
streams and distribution channels is an important
consideration and varies among industry partici-
pants. In general, however, the large and higher
rated apparel companies are well diversified. In-
ternational and company-owned stores play an
ever-more important role as retailers consolidate
and focus on higher-end brands.
◆ Brand equity. This is the value that a brand
name brings to the product. Brand equity facilitates
premium pricing, product extensions via licensing
arrangements, and customer retention.
An apparel company with a portfolio of strong
brands enjoys considerable advantages, including
greater leverage with retailers. With the consolidation
in retail environment, retailers have greater purchasing
power and are increasingly focusing on their own pri-
vate label brands. Nevertheless, they still need well-
known or nationally recognized brands to draw
consumer traffic into the stores.
◆ Profitability and peer group comparisons.
A company’s profitability determines its ability to fund
its growth internally and to withstand business adver-
sity versus its peer group. Generally, those companies
with a portfolio of premium brands will be able to sus-
tain higher margins and profitability. In contrast, firms
with second-tier brands or that primarily produce
private-label goods will have tighter margins and,
thus, less operating leverage.
◆ Management. Ownership structure, manage-
ment practices, internal controls, corporate gover-
MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY
nance, and financial disclosure policies fall under the
management umbrella. We examine all these areas
regularly as part of our ratings methodology.
Standard & Poor’s credit ratings incorporate our as-
sessment of management’s track record, and more
importantly, its strategy going forward.
Though difficult to quantify, these factors are im-
portant because they help the analyst evaluate man-
agement’s intent and commitment to credit quality.
We place a higher degree of confidence in manage-
ment that possesses significant industry experience,
consistently meets or exceeds forecast projections,
and deals openly with pressing credit issues.
28
Financial risk
A company’s financial risk profile is an important
factor in its credit rating. The more aggressive a com-
pany’s financial profile, the more limited is its ability
to grow, overcome operating difficulties and compet-
itive threats, and invest in its brands.
Key factors we assess when determining a com-
pany’s financial risk profile include its financial poli-
cies, liquidity, and quantitative measures for cash
flow protection and leverage, which include
off–balance-sheet obligations.
◆ Financial policies. We assess financial poli-
cies in several ways. First, we evaluate how a com-
pany finances its growth (including acquisitions and
capital expenditures) and examine its accounting
methods and the integrity of its financial disclosures.
We also consider how the company chooses to return
value to its shareholders, whether in the form of high-
er dividends and/or share repurchases, and whether
it has made significant changes to its strategy. Finally,
we assess its corporate governance practices. This is
important, as weak corporate governance can under-
mine the company’s creditworthiness.
◆ Liquidity. The liquidity assessment focuses on
a company’s ability to fund its business initiatives, as
well as its near- to intermediate-term financial oblig-
ations (including debt amortization, and pension and
other postretirement payments) and other projected
expenditures from cash. We assess the company’s
operating cash flows and its ability to access capital
markets, including revolving credit facilities.
◆ Cash flow protection and leverage. Cash
flow protection focuses on a company’s ability to
meet its interest and financial obligations (including
annual debt amortization) and to fund capital expen-
ditures from operating cash flows. Cash flow cover-
age measures include funds from operations (FFO)
as a percentage of debt, EBITDA to interest, and
EBIT to interest.
Incorporating off–balance-sheet obligations may
significantly alter a company’s financial risk assess-
ment. Among the off–balance-sheet obligations in-
corporated into our ratio calculations are the net
present value of non-cancelable operating lease pay-
ments, as well as trade receivables financing, and
pension and postretirement obligations. ■
Susan Ding
Apparel Credit Analyst
apf_0507.qxp 5/14/2007 1:07 PM Page 29
G LOSSARY
Allowance from vendors — Price adjustment to a buyer
for damaged merchandise or for the return of unsat-
isfactory merchandise.
Assortment plan — The range of merchandise in a cat-
egory that managers intend to keep in a store at a
certain inventory level.
Basic item — Apparel with a style and demand that are
generally constant, and which must remain in stock
to satisfy customers.
Brand — A name that identifies the goods of one seller.
Business-to-business (B2B) exchanges — Online mar-
ketplaces that enable trading partners to conduct
real-time business transactions.
Buyer — The person responsible for the merchandising
operations of a retail outlet or a specific department.
Carryover merchandise — Goods left over from a pre-
ceding season that are offered for sale in the follow-
ing season.
Cash discount — A price reduction given by a supplier
to customers paying their invoices before the end of
a stated discount period.
Centralized buying — A practice among retail chains in
which merchandise is purchased by staff from cor-
porate headquarters.
Co-op money — A vendor’s contribution to a retailer for
the promotion of merchandise.
Direct buying — Buying straight from the manufacturer
without going through an intermediary.
Electronic data interchange (EDI) — A computer net-
work linking retailers, manufacturers, and the entire
retail distribution pipeline.
Factoring — The practice of selling manufacturers’
and wholesalers’ account receivables to financial
institutions.
Fashion cycle — The life span of a clothing style, from
its rise in popularity to its decline.
Fashion trend — A style that has moved from limited to
wide acceptance.
Gross margin — The difference between net sales and
the total cost of goods sold, expressed as a percent-
age of net sales.
Gross profit — Net sales minus the cost of goods sold.
Jobber — A middleman who buys from a manufacturer
and sells to a wholesaler.
Knockoff — An item that is an exact or similar repro-
duction of goods made by another manufacturer.
Markdown — A reduction in the retail price of an item,
expressed as a percentage of the original price of
the merchandise.
Markon — The difference between the cost as billed
(before deductions for cash discount) and the re-
tail price.
Markup — An increase in an item’s price.
Merchandise vendor allowances or vendor al -
lowances — Wholesalers and manufacturers pro-
vide retailers with multiple forms of support to
enable the swift movement of goods through the
channel. The forms of support include cooperative
advertising, payroll reimbursements, and markdown
reimbursement programs, all of which have an ad-
verse impact on wholesalers’ and manufacturers’
profit margins, although they may in fact increase
retailers’ profits.
Net — A vendor’s billing term signifying that no cash or
trade discount is allowed.
Open to buy — The amount of money that a retailer is
willing to invest in inventory for future sales; it is af-
fected by current sales trends.
Out of stock — The absence of merchandise in certain
styles, sizes, and/or colors in a store’s inventory.
Point-of-sale (POS) terminal — Electronic devices at
store checkout counters that read the universal
product code (UPC) on product labels in order to tal-
ly each customer’s sale. POS terminals collect other
data that enable stores to track sales trends and to
MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY
assess the effectiveness of promotions.
Price point — The price range at which a line of mer-
chandise is offered for sale.
Private label — Merchandise designed by a retailer
that carries the store’s own brand name.
Quick response — A partnership between a vendor and
retailer through which orders are automatically re-
plenished via computer links.
Ready-to-wear — Any article of apparel manufactured
for sale in a retail store (that is, not custom made).
29
apf_0507.qxp 5/14/2007 1:07 PM Page 30

Same-store sales — The measure of year-on-year

sales growth or decline for a store or chain of
stores. The figure excludes new and closed stores,
which can skew results. Also referred to as
comparable-store sales.

Scanning — The electronic reading of a bar code

that yields such product information as price, col-
or, and size.

Shrinkage — Loss of inventory due to accounting er-

rors, misdirected shipments, mistakes in ringing up
charges or pricing goods, bookkeeping errors,
spoilage, breakage, and thefts by employees, ven-
dors, or customers.

Stockkeeping unit (SKU) — A single item of mer-

chandise, as measured for inventory management
purposes.

Stock turnover — The number of times during the

year that inventory is sold out. The figure is de-
rived by dividing total cost of goods sold by aver-
age inventory value.
MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY

30
apf_0507.qxp 5/14/2007 1:07 PM Page 31
I NDUSTRY R EFERENCES
PERIODICALS
Apparel
Edgell Communications
4 Middlebury Blvd., Randolph, NJ 07869
(973) 252-0100
Web site: http://www.apparelmag.com
Monthly; aimed at apparel industry executives,
with a focus on technology, new products, and
business strategy.
Apparel News
CaliforniaMart
110 E. 9th St., Ste. A-777, Los Angeles, CA 90079
(213) 627-3737
Web site: http://www.apparelnews.net
Weekly; online apparel newsmagazine and fashion
trade portal for manufacturers and retailers.
The Apparel Strategist
P.O. Box 406, Fleetwood, PA 19522
(610) 944-8291
Web site: http://www.apparelstrategist.com
Monthly and annual; contains apparel industry
statistics, news, and trends.
DNR
Fairchild Publications Inc.
750 Third Ave., 10th Fl., New York, NY 10017
(212) 630-3600
Web site: http://www.dnrnews.com
Weekly; focuses on the men’s apparel industry.
Footwear News
Fairchild Publications Inc.
750 Third Ave., 10th Fl., New York, NY 10017
(212) 630-4880
Web site: http://www.footwearnews.com
Weekly; covers current trends and issues in the
footwear industry.
WWD (Women’s Wear Daily)
Fairchild Publications Inc.
750 Third Ave., 6th Fl., New York, NY 10017
(212) 630-4600
Web site: http://www.wwd.com
Daily; focuses on the women’s apparel industry.
TRADE ASSOCIATIONS
American Apparel & Footwear Association (AAFA)
1601 N. Kent St., Ste. 1200, Arlington, VA 22209
(800) 520-2262; (703) 524-1864
Web site: http://www.apparelandfootwear.org
Provides apparel and footwear manufacturers with in-
dustry statistics and other demographic information.
Cotton Incorporated
6399 Weston Pkwy., Cary, NC 27513
(919) 678-2220
Web site: http://www.cottoninc.com
A worldwide organization funded by cotton growers
and importers that provides research and promotional
support to increase demand for and the profitability of
cotton; publishes Lifestyle Monitor, a newsletter about
consumer attitudes and behavior.
LIMA (International Licensing Industry Merchandisers’
Association)
350 Fifth Ave., Ste. 1408, New York, NY 10118
(212) 244-1944
Web site: http://www.licensing.org
A worldwide organization that works with licensors and
licensees for the advancement of professionalism in li-
censing through research, national and international
seminars, trade events, and publications.
National Sporting Goods Association (NSGA)
1601 Feehanville Dr., Ste 300, Mt. Prospect, IL 60056
(847) 296-6742
Web site: http://www.nsga.org
Represents more than 22,000 sporting goods
retailer/dealer outlets and 3,000 product manufacturers,
suppliers, and sales agents.
SGMA International
1150 17th St., NW, Ste. 850, Washington, DC 20036
(202) 775-1762
Web site: http://www.sgma.com/index.html
Provides manufacturers, producers, and distributors
with information and statistics related to the global
sports apparel, athletic footwear, and sporting goods
equipment industries; formerly called the Sporting
Goods Manufacturers Association.
US Association of Importers of Textiles & Apparel
13 E. 16th St., New York, NY 10003
(212) 463-0089
Web site: http://www.usaita.com
MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY
Nonprofit industry association representing textile- and
apparel-importing firms before the US government, the
business community, and the public.
MARKET RESEARCH FIRMS
The Conference Board
845 Third Ave., New York, NY 10022
(212) 759-0900
Web site: http://www.conference-board.org
A not-for-profit, nonadvocacy business membership
and research organization that calculates and dissemi-
nates leading economic indicators and an index of con-
sumer confidence.
31
apf_0507.qxp 5/14/2007 1:07 PM Page 32

The NPD Group Inc.

900 W. Shore Rd., Port Washington, NY 11050
(516) 625-0700
Web site: http://www.npd.com
A market research and consulting organization provid-
ing global sales and marketing perspectives; combines
consumer information with point-of-sale data collected
from retailers and other distribution channels.

Planalytics Inc.
1325 Morris Dr., Ste. 201, Wayne, PA 19087
(800) 882-5881
Web site: http://www.planalytics.com
A consulting firm that helps companies make more ef-
fective and profitable decisions by forecasting weather-
driven changes in supply, demand, and prices for prod-
ucts and services.

Teenage Research Unlimited

707 Skokie Blvd., 7th Fl., Northbrook, IL 60062
(847) 564-3440
Web site: http://www.teenresearch.com
A market research firm specializing in the teen demo-
graphic; provides qualitative and quantitative research.

GOVERNMENT AGENCIES

Bureau of Labor Statistics (BLS)

Postal Square Building
2 Massachusetts Ave. NE, Washington, DC 20212
(202) 691-5200
Web site: http://stats.bls.gov
This division of the US Department of Labor is the prin-
cipal fact-finding agency of the federal government in
the broad fields of labor, economics, and statistics. Its
major programs include the consumer price index, the
producer price index, the employment cost index, and
the national compensation survey.

US Department of Commerce
1401 Constitution Ave. NW, Washington, DC 20230
(202) 482-4883
Web site: http://www.doc.gov
This cabinet-level department is responsible for various
government agencies that monitor and regulate US com-
merce. Among its many divisions is the Census Bureau,
which publishes population statistics and projections.
MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY

CORPORATE INFORMATION

Many corporate filings with the federal Securities and

Exchange Commission, including 10-Ks and 10-Qs, are
available through its Edgar Web site:
http://www.sec.gov/edgar/searchedgar/webusers.htm

In addition, most apparel and footwear manufacturers

operate their own Web sites.

32
apf_0507.qxp 5/14/2007 1:07 PM Page 33
D EFINITIONS FOR C OMPARATIVE C OMPANY A NALYSIS TABLES
Operating revenues
Net sales and other operating revenues. Excludes
interest income if such income is “nonoperating.”
Includes franchised/leased department income for
retailers and royalties for publishers and oil and mining
companies. Excludes excise taxes for tobacco, liquor,
and oil companies.
Net income
Profits derived from all sources, after deductions of
expenses, taxes, and fixed charges, but before any
discontinued operations, extraordinary items, and
dividend payments (preferred and common).
Return on revenues
Net income divided by operating revenues.
Return on assets
Net income divided by average total assets. Used in
industry analysis and as a measure of asset-use
efficiency.
Return on equity
Net income, less preferred dividend requirements,
divided by average common shareholder‘s equity.
Generally used to measure performance and to make
industry comparisons.
Current ratio
Current assets divided by current liabilities. It is a
measure of liquidity. Current assets are those assets
expected to be realized in cash or used up in the
production of revenue within one year. Current liabilities
generally include all debts/obligations falling due within
one year.
Debt/capital ratio
Long-term debt (excluding current portion) divided by
total invested capital. It indicates how highly “leveraged”
a company might be. Long-term debt includes those
debts/obligations due after one year, including bonds,
notes payable, mortgages, lease obligations, and
industrial revenue bonds. Other long-term debt, when
reported as a separate account, is excluded; this account
generally includes pension and retirement benefits. Total
invested capital is the sum of stockholders’ equity, long-
term debt, capital lease obligations, deferred income
taxes, investment credits, and minority interest.
Debt as a percent of net working capital
Long-term debt (excluding current portion) divided by the
difference between current assets and current liabilities.
It is an indicator of a company’s liquidity.
Price/earnings ratio
The ratio of market price to earnings, obtained by
dividing the stock’s high and low market price for the
year by earnings per share (before extraordinary items).
It essentially indicates the value investors place on a
company’s earnings.
Dividend payout ratio
This is the percentage of earnings paid out in dividends.
It is calculated by dividing the annual dividend by the
earnings. Dividends are generally total cash payments
per share over a 12-month period. Although payments are
usually calculated from the ex-dividend dates, they may
also be reported on a declared basis where this has been
established to be a company’s payout policy.
Dividend yield
The total cash dividend payments divided by the year’s
high and low market prices for the stock.
Earnings per share
The amount a company reports as having been earned
for the year (based on generally accepted accounting
standards), divided by the number of shares outstanding.
Amounts reported in Industry Surveys exclude
extraordinary items.
Tangible book value per share
This measure indicates the theoretical dollar amount
per common share one might expect to receive should
liquidation take place. Generally, book value is
determined by adding the stated (or par) value of the
common stock, paid-in capital, and retained earnings,
then subtracting intangible assets, preferred stock at
liquidating value, and unamortized debt discount. This
amount is divided by the number of outstanding shares
to get book value per common share.
Share price
MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY
This shows the calendar-year high and low of a stock’s
market price.
In addition to the footnotes that appear at the bottom of
each page, you will notice some or all of the following:
NA—Not available.
NM—Not meaningful.
NR—Not reported.
AF—Annual figure. Data are presented on an annual
basis.
CF—Combined figure. In this case, data are not available
because one or more components are combined with
other items.
33
34
MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY
apf_0507.qxp

C OMPARATIVE C OMPANY A NALYSIS — A PPAREL & F OOTWEAR

Operating Revenues
Million $ Compound Growth Rate (%) Index Basis (1996 = 100)
5/14/2007

Ticker Company Yr. End 2006 2005 2004 2003 2002 2001 1996 10-Yr. 5-Yr. 1-Yr. 2006 2005 2004 2003 2002
APPAREL, ACCESSORIES & LUXURY GOODS‡
ASHW § ASHWORTH INC OCT 209.6 204.8 173.1 A 149.4 127.5 124.7 75.4 10.8 10.9 2.3 278 272 230 198 169
COH * COACH INC JUN 2,111.5 1,710.4 C 1,321.1 953.2 719.4 616.1 NA NA 27.9 23.4 ** ** ** ** NA
FOSL § FOSSIL INC DEC NA 1,041.0 960.3 781.7 663.9 546.3 205.9 A NA NA NA NA 506 466 380 322
1:07 PM

HBI † HANESBRANDS INC JUN 4,472.8 A 4,683.7 A 4,632.7 NA NA NA NA NA NA (4.5) ** ** ** ** NA

JNY * JONES APPAREL GROUP INC DEC 4,742.8 5,074.2 4,649.7 A 4,375.3 A 4,340.9 A 4,097.2 A 1,034.1 16.5 3.0 (6.5) 459 491 450 423 420

KWD § KELLWOOD CO # JAN 1,961.8 D 2,064.6 D 2,555.7 A 2,346.5 A,C 2,204.7 A 2,281.8 1,521.0 2.6 (3.0) (5.0) 129 136 168 154 145
LIZ * LIZ CLAIBORNE INC DEC 4,994.3 4,847.8 4,632.8 4,241.1 3,717.5 3,448.5 A 2,217.5 8.5 7.7 3.0 225 219 209 191 168
MOV § MOVADO GROUP INC # JAN 532.9 470.9 419.0 A 330.2 300.1 299.7 215.1 9.5 12.2 13.1 248 219 195 154 140
Page 34

OXM § OXFORD INDUSTRIES INC # MAY NA 1,121.8 D,F 1,325.7 A,F 1,121.7 A,F 764.6 677.3 703.2 NA NA NA NA 160 189 160 109
PVH † PHILLIPS-VAN HEUSEN CORP # JAN NA 1,908.8 1,641.4 1,582.0 A 1,405.0 1,431.9 1,359.6 NA NA NA NA 140 121 116 103

RL * POLO RALPH LAUREN CP -CL A # MAR NA 3,746.3 A 3,305.4 A 2,649.7 C 2,439.3 2,363.7 1,180.4 NA NA NA NA 317 280 224 207
ZQK § QUIKSILVER INC OCT 2,362.3 1,780.9 A 1,266.9 A 975.0 705.5 A 620.6 A 194.6 28.4 30.6 32.6 1,214 915 651 501 363
UNF § UNIFIRST CORP AUG 821.0 763.8 719.4 A 596.9 578.9 556.4 391.8 7.7 8.1 7.5 210 195 184 152 148
VFC * VF CORP DEC 6,215.8 D 6,502.4 A 6,054.5 A,F 5,207.5 A,F 5,083.5 D,F 5,518.8 F 5,137.2 A 1.9 2.4 (4.4) 121 127 118 101 99
FOOTWEAR‡
CROX § CROCS INC DEC 354.7 108.6 13.5 A 1.2 NA NA NA NA NA 226.7 ** ** ** ** NA
DECK § DECKERS OUTDOOR CORP DEC 304.4 264.8 214.8 121.1 99.1 A 91.5 101.8 11.6 27.2 15.0 299 260 211 119 97
KSWS § K-SWISS INC -CL A DEC 501.1 508.6 484.1 429.2 D 290.4 C 236.1 106.8 16.7 16.2 (1.5) 469 476 453 402 272
NKE * NIKE INC -CL B # MAY NA 14,954.9 13,739.7 12,253.1 10,697.0 9,893.0 C 9,186.5 NA NA NA NA 163 150 133 116
SKX § SKECHERS U S A INC DEC 1,205.4 1,006.5 920.3 835.0 943.6 960.4 NA NA 4.6 19.8 ** ** ** ** NA

SRR § STRIDE RITE CORP NOV 706.8 A 588.2 A 558.3 550.1 532.4 529.1 448.3 4.7 6.0 20.2 158 131 125 123 119
TBL † TIMBERLAND CO -CL A DEC 1,567.6 1,565.7 1,500.6 1,342.1 1,190.9 1,183.6 690.0 8.6 5.8 0.1 227 227 217 195 173
WWW § WOLVERINE WORLD WIDE DEC 1,141.9 1,061.0 991.9 888.9 A 827.1 720.1 511.0 A 8.4 9.7 7.6 223 208 194 174 162
OTHER COMPANIES WITH SIGNIFICANT APPAREL OPERATIONS
COLM COLUMBIA SPORTSWEAR CO DEC 1,293.2 1,160.2 A 1,099.3 953.6 A,C 816.3 779.6 299.0 15.8 10.7 11.5 433 388 368 319 273
HMX HARTMARX CORP NOV 597.9 F 598.2 A,F 586.4 A,F 561.8 F 570.3 F 601.6 A,F 610.2 A,F (0.2) (0.1) (0.0) 98 98 96 92 93

Note: Data as originally reported. ‡ S&P 1500 Index group. * Company included in the S&P 500. † Company included in the S&P MidCap. § Company included in the S&P SmallCap. # Of the following calendar year. ** Not calculated; data for base year or end year not available.
A - This year's data reflect an acquisition or merger. B - This year's data reflect a major merger resulting in the formation of a new company. C - This year's data reflect an accounting change. D - Data exclude discontinued operations. E - Includes excise taxes. F - Includes
other (nonoperating) income. G - Includes sale of leased depts. H - Some or all data are not available, due to a fiscal year change.

Net Income

Million $ Compound Growth Rate (%) Index Basis (1996 = 100)

Ticker Company Yr. End 2006 2005 2004 2003 2002 2001 1996 10-Yr. 5-Yr. 1-Yr. 2006 2005 2004 2003 2002
APPAREL, ACCESSORIES & LUXURY GOODS‡
ASHW § ASHWORTH INC OCT 1.0 (0.7) 8.2 7.3 2.5 2.8 1.4 (3.8) (19.6) NM 68 (52) 585 522 179
COH * COACH INC JUN 494.3 388.7 261.7 146.6 85.8 64.0 NA NA 50.5 27.2 ** ** ** ** NA
FOSL § FOSSIL INC DEC NA 78.1 90.6 68.3 58.9 43.7 13.6 NA NA NA ** 574 666 503 433
HBI † HANESBRANDS INC JUN 322.5 218.5 449.6 NA NA NA NA NA NA 47.6 ** ** ** ** NA
JNY * JONES APPAREL GROUP INC DEC (146.0) 274.3 301.8 328.6 332.3 236.2 80.9 NM NM NM (181) 339 373 406 411

KWD § KELLWOOD CO # JAN 21.1 23.1 66.3 68.9 42.0 37.7 37.6 (5.6) (11.0) (8.7) 56 61 176 183 112
LIZ * LIZ CLAIBORNE INC DEC 254.7 317.4 313.6 279.7 231.2 192.1 155.7 5.0 5.8 (19.8) 164 204 201 180 149
MOV § MOVADO GROUP INC # JAN 50.1 26.6 26.3 22.9 20.1 17.1 11.7 15.7 24.0 88.4 429 228 225 195 172
OXM § OXFORD INDUSTRIES INC # MAY NA 51.2 49.8 39.7 20.3 10.6 19.6 NA NA NA ** 261 254 202 103
PVH † PHILLIPS-VAN HEUSEN CORP # JAN NA 111.7 58.6 14.7 30.4 10.7 18.5 NA NA NA ** 603 316 79 164
 Net Income (continued)
apf_0507.qxp

Million $ Compound Growth Rate (%) Index Basis (1996 = 100)

Ticker Company Yr. End 2006 2005 2004 2003 2002 2001 1996 10-Yr. 5-Yr. 1-Yr. 2006 2005 2004 2003 2002
RL * POLO RALPH LAUREN CP -CL A # MAR NA 308.0 190.4 171.0 174.2 172.5 117.3 NA NA NA ** 263 162 146 149
ZQK § QUIKSILVER INC OCT 93.0 107.1 81.4 58.5 37.6 28.0 11.7 23.1 27.1 (13.2) 798 919 698 502 322
UNF § UNIFIRST CORP AUG 39.2 43.3 33.6 29.3 26.9 23.2 24.7 4.7 11.0 (9.6) 159 176 136 119 109
VFC * VF CORP DEC 535.1 518.5 474.7 397.9 364.4 137.8 299.5 6.0 31.2 3.2 179 173 158 133 122
5/14/2007

FOOTWEAR‡
CROX § CROCS INC DEC 64.4 17.0 (1.5) (1.2) NA NA NA NA NA 279.5 ** ** ** ** NA
DECK § DECKERS OUTDOOR CORP DEC 31.5 31.8 25.5 9.2 1.6 1.6 3.7 24.0 80.9 (1.0) 862 871 699 250 44
KSWS § K-SWISS INC -CL A DEC 76.9 75.2 71.3 53.8 28.7 23.3 0.7 NM 27.0 2.1 NM NM NM NM 3,926
NKE * NIKE INC -CL B # MAY NA 1,392.0 1,211.6 945.6 740.1 668.3 795.8 NA NA NA ** 175 152 119 93
1:07 PM

SKX § SKECHERS U S A INC DEC 71.0 44.7 23.6 (11.9) 47.0 47.3 NA NA 8.5 58.8 ** ** ** ** NA

SRR § STRIDE RITE CORP NOV 34.3 24.6 25.7 25.5 24.1 19.0 2.5 29.9 12.5 39.6 1,372 983 1,027 1,020 965
TBL † TIMBERLAND CO -CL A DEC 106.4 164.6 152.7 117.9 90.2 106.7 20.4 18.0 (0.1) (35.3) 521 806 748 577 442
WWW § WOLVERINE WORLD WIDE DEC 83.6 74.5 65.9 51.7 47.9 45.2 32.9 9.8 13.1 12.3 255 227 201 157 146
Page 35

OTHER COMPANIES WITH SIGNIFICANT APPAREL OPERATIONS

COLM COLUMBIA SPORTSWEAR CO DEC 123.0 130.7 138.6 120.1 102.5 88.8 21.0 19.3 6.7 (5.9) 586 622 660 572 488
HMX HARTMARX CORP NOV 7.3 23.6 15.9 8.7 3.4 (13.9) 23.8 (11.2) NM (69.1) 31 99 67 37 14

Note: Data as originally reported. ‡ S&P 1500 Index group. * Company included in the S&P 500. † Company included in the S&P MidCap. § Company included in the S&P SmallCap. # Of the following calendar year. ** Not calculated; data for base year or end year not available.

Return on Revenues (%) Return on Assets (%) Return on Equity (%)

Ticker Company Yr. End 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002
APPAREL, ACCESSORIES & LUXURY GOODS‡
ASHW § ASHWORTH INC OCT 1.0 (0.7) 8.2 7.3 2.5 2.8 1.4 (3.8) (19.6) NM 68 (52) 585 522 179
COH * COACH INC JUN 494.3 388.7 261.7 146.6 85.8 64.0 NA NA 50.5 27.2 ** ** ** ** NA
FOSL § FOSSIL INC DEC NA 78.1 90.6 68.3 58.9 43.7 13.6 NA NA NA ** 574 666 503 433
HBI † HANESBRANDS INC JUN 322.5 218.5 449.6 NA NA NA NA NA NA 47.6 ** ** ** ** NA
JNY * JONES APPAREL GROUP INC DEC (146.0) 274.3 301.8 328.6 332.3 236.2 80.9 NM NM NM (181) 339 373 406 411

KWD § KELLWOOD CO # JAN 21.1 23.1 66.3 68.9 42.0 37.7 37.6 (5.6) (11.0) (8.7) 56 61 176 183 112
LIZ * LIZ CLAIBORNE INC DEC 254.7 317.4 313.6 279.7 231.2 192.1 155.7 5.0 5.8 (19.8) 164 204 201 180 149
MOV § MOVADO GROUP INC # JAN 50.1 26.6 26.3 22.9 20.1 17.1 11.7 15.7 24.0 88.4 429 228 225 195 172
OXM § OXFORD INDUSTRIES INC # MAY NA 51.2 49.8 39.7 20.3 10.6 19.6 NA NA NA ** 261 254 202 103
PVH † PHILLIPS-VAN HEUSEN CORP # JAN NA 111.7 58.6 14.7 30.4 10.7 18.5 NA NA NA ** 603 316 79 164

RL * POLO RALPH LAUREN CP -CL A # MAR NA 308.0 190.4 171.0 174.2 172.5 117.3 NA NA NA ** 263 162 146 149
ZQK § QUIKSILVER INC OCT 93.0 107.1 81.4 58.5 37.6 28.0 11.7 23.1 27.1 (13.2) 798 919 698 502 322
UNF § UNIFIRST CORP AUG 39.2 43.3 33.6 29.3 26.9 23.2 24.7 4.7 11.0 (9.6) 159 176 136 119 109
VFC * VF CORP DEC 535.1 518.5 474.7 397.9 364.4 137.8 299.5 6.0 31.2 3.2 179 173 158 133 122
FOOTWEAR‡
CROX § CROCS INC DEC 64.4 17.0 (1.5) (1.2) NA NA NA NA NA 279.5 ** ** ** ** NA
DECK § DECKERS OUTDOOR CORP DEC 31.5 31.8 25.5 9.2 1.6 1.6 3.7 24.0 80.9 (1.0) 862 871 699 250 44
KSWS § K-SWISS INC -CL A DEC 76.9 75.2 71.3 53.8 28.7 23.3 0.7 NM 27.0 2.1 NM NM NM NM 3,926
NKE * NIKE INC -CL B # MAY NA 1,392.0 1,211.6 945.6 740.1 668.3 795.8 NA NA NA ** 175 152 119 93
SKX § SKECHERS U S A INC DEC 71.0 44.7 23.6 (11.9) 47.0 47.3 NA NA 8.5 58.8 ** ** ** ** NA

SRR § STRIDE RITE CORP NOV 34.3 24.6 25.7 25.5 24.1 19.0 2.5 29.9 12.5 39.6 1,372 983 1,027 1,020 965
TBL † TIMBERLAND CO -CL A DEC 106.4 164.6 152.7 117.9 90.2 106.7 20.4 18.0 (0.1) (35.3) 521 806 748 577 442
WWW § WOLVERINE WORLD WIDE DEC 83.6 74.5 65.9 51.7 47.9 45.2 32.9 9.8 13.1 12.3 255 227 201 157 146
OTHER COMPANIES WITH SIGNIFICANT APPAREL OPERATIONS
COLM COLUMBIA SPORTSWEAR CO DEC 123.0 130.7 138.6 120.1 102.5 88.8 21.0 19.3 6.7 (5.9) 586 622 660 572 488
HMX HARTMARX CORP NOV 7.3 23.6 15.9 8.7 3.4 (13.9) 23.8 (11.2) NM (69.1) 31 99 67 37 14

Note: Data as originally reported. ‡ S&P 1500 Index group. * Company included in the S&P 500. † Company included in the S&P MidCap. § Company included in the S&P SmallCap. # Of the following calendar year.

MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY

35
36
MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY
apf_0507.qxp

Current Ratio Debt / Capital Ratio (%) Debt as a % of Net Working Capital

Ticker Company Yr. End 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002
APPAREL, ACCESSORIES & LUXURY GOODS‡
ASHW § ASHWORTH INC OCT 0.5 NM 4.7 4.9 2.0 0.6 NM 6.2 7.0 2.6 0.9 NM 8.6 8.8 3.3
5/14/2007

COH * COACH INC JUN 23.4 22.7 19.8 15.4 11.9 33.2 32.7 31.8 27.7 24.5 44.5 42.8 43.3 42.7 42.0
FOSL § FOSSIL INC DEC NA 7.5 9.4 8.7 8.9 NA 10.2 13.2 12.8 13.6 NA 14.9 19.1 17.9 19.5
HBI † HANESBRANDS INC JUN 7.2 4.7 9.7 NA NA 7.1 5.1 NA NA NA 11.1 8.1 NA NA NA
JNY * JONES APPAREL GROUP INC DEC NM 5.4 6.5 7.5 7.7 NM 6.0 6.9 8.2 9.2 NM 10.3 11.6 13.6 15.8

KWD § KELLWOOD CO # JAN 1.1 1.1 2.6 2.9 1.9 1.4 1.5 4.6 5.4 3.7 3.4 3.5 9.8 11.5 8.3
1:07 PM

LIZ * LIZ CLAIBORNE INC DEC 5.1 6.5 6.8 6.6 6.2 7.7 10.3 11.1 11.4 10.9 12.3 16.6 18.5 19.5 19.7
MOV § MOVADO GROUP INC # JAN 9.4 5.7 6.3 6.9 6.7 8.9 5.2 6.1 6.2 6.3 14.3 8.3 8.9 8.9 9.8
OXM § OXFORD INDUSTRIES INC # MAY NA 4.6 3.8 3.5 2.7 NA 5.7 6.2 6.7 5.5 NA 14.6 18.4 18.5 11.2
PVH † PHILLIPS-VAN HEUSEN CORP # JAN NA 5.9 3.6 0.9 2.2 NA 5.9 2.5 NM 4.1 NA 19.8 11.4 NM 11.3

RL * POLO RALPH LAUREN CP -CL A # MAR NA 8.2 5.8 6.5 7.1 NA 10.6 7.6 7.9 9.2 NA 16.5 12.3 13.0 15.8
Page 36

ZQK § QUIKSILVER INC OCT 3.9 6.0 6.4 6.0 5.3 4.0 6.8 9.6 10.1 8.6 11.5 16.2 15.7 16.3 15.4
UNF § UNIFIRST CORP AUG 4.8 5.7 4.7 4.9 4.6 5.0 6.0 5.5 5.8 5.4 9.1 11.1 9.6 9.1 9.0
VFC * VF CORP DEC 8.6 8.0 7.8 7.6 7.2 10.0 10.2 10.2 10.2 9.4 17.6 19.4 21.2 21.9 18.9
FOOTWEAR‡
CROX § CROCS INC DEC 18.2 15.6 NM NM NA 34.1 36.0 NM NA NA 56.7 221.5 NA NA NA
DECK § DECKERS OUTDOOR CORP DEC 10.4 12.0 11.9 7.6 1.6 13.7 16.5 17.2 7.5 1.6 16.1 20.0 24.1 14.1 2.6
KSWS § K-SWISS INC -CL A DEC 15.3 14.8 14.7 12.5 9.9 20.8 23.8 26.9 25.7 16.7 24.7 30.0 35.1 33.7 21.7
NKE * NIKE INC -CL B # MAY NA 9.3 8.8 7.7 6.9 NA 14.9 14.5 12.9 11.2 NA 23.3 23.2 21.6 18.9
SKX § SKECHERS U S A INC DEC 5.9 4.4 2.6 NM 5.0 10.8 8.1 4.8 NM 10.6 17.9 14.0 8.6 NM 20.5

SRR § STRIDE RITE CORP NOV 4.9 4.2 4.6 4.6 4.5 7.6 6.5 7.7 7.5 7.0 12.2 9.6 10.0 9.8 9.4
TBL † TIMBERLAND CO -CL A DEC 6.8 10.5 10.2 8.8 7.6 13.0 21.3 21.8 20.0 17.3 19.5 31.7 32.5 29.4 24.6
WWW § WOLVERINE WORLD WIDE DEC 7.3 7.0 6.6 5.8 5.8 12.9 11.8 10.8 9.3 8.9 17.3 16.2 14.8 12.9 12.9
OTHER COMPANIES WITH SIGNIFICANT APPAREL OPERATIONS
COLM COLUMBIA SPORTSWEAR CO DEC 9.5 11.3 12.6 12.6 12.6 12.3 13.6 16.0 17.5 19.2 15.6 17.2 19.5 21.6 24.8
HMX HARTMARX CORP NOV 1.2 3.9 2.7 1.5 0.6 1.5 5.0 3.6 1.9 0.7 2.9 10.1 7.7 4.7 1.9

Note: Data as originally reported. ‡ S&P 1500 Index group. * Company included in the S&P 500. † Company included in the S&P MidCap. § Company included in the S&P SmallCap. # Of the following calendar year.

Price / Earnings Ratio (High-Low) Dividend Payout Ratio (%) Dividend Yield (High-Low, %)

Ticker Company Yr. End 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002

APPAREL, ACCESSORIES & LUXURY GOODS‡

ASHW § ASHWORTH INC OCT NM-88 NM-NM 18-12 16-9 52-24 0 NM 0 0 0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0
COH * COACH INC JUN 35-19 36-24 41-24 50-18 37-18 0 0 0 0 0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0
FOSL § FOSSIL INC DEC NA-NA 26-14 25-14 21-11 19-10 NA 0 0 0 0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0
HBI † HANESBRANDS INC JUN 7-5 NA-NA NA-NA NA-NA NA-NA NA NA NA NA NA NA-NA NA-NA NA-NA NA-NA NA-NA
JNY * JONES APPAREL GROUP INC DEC NM-NM 16-11 16-14 15-10 16-10 NM 19 15 6 0 1.8-1.4 1.7-1.2 1.1-0.9 0.6-0.4 0.0-0.0
KWD § KELLWOOD CO # JAN 42-28 40-25 19-13 16-9 19-12 78 74 27 25 37 2.8-1.8 2.9-1.8 2.0-1.4 2.8-1.5 3.2-2.0
LIZ * LIZ CLAIBORNE INC DEC 18-13 15-11 15-11 15-10 15-11 9 8 8 9 10 0.7-0.5 0.7-0.5 0.7-0.5 0.9-0.6 1.0-0.7
MOV § MOVADO GROUP INC # JAN 16-10 19-15 18-12 16-9 15-9 13 19 15 11 7 1.3-0.8 1.3-1.0 1.3-0.8 1.2-0.7 0.8-0.5
OXM § OXFORD INDUSTRIES INC # MAY NA-NA 20-11 16-11 15-4 11-7 NA 19 17 18 31 NA-NA 1.7-1.0 1.5-1.1 4.1-1.3 4.3-2.8
PVH † PHILLIPS-VAN HEUSEN CORP # JAN NA-NA 16-11 25-14 NM-NM 15-9 NA 7 13 NM 14 0.5-0.3 0.6-0.4 0.9-0.5 1.3-0.8 1.4-0.9

RL * POLO RALPH LAUREN CP -CL A # MAR NA-NA 19-12 23-15 18-11 17-9 NA 7 11 12 0 0.4-0.2 0.6-0.4 0.7-0.5 1.0-0.6 0.0-0.0
ZQK § QUIKSILVER INC OCT 21-15 20-12 22-12 18-11 18-11 0 0 0 0 0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0
UNF § UNIFIRST CORP AUG 20-14 20-12 17-14 18-9 21-13 7 7 9 10 11 0.5-0.4 0.5-0.3 0.6-0.5 1.1-0.5 0.8-0.5
VFC * VF CORP DEC 17-11 13-11 13-10 12-9 14-10 40 24 24 28 30 3.6-2.3 2.2-1.8 2.5-1.9 3.1-2.3 3.1-2.1
 Price / Earnings Ratio (High-Low) (cont’d) Dividend Payout Ratio (%) (cont’d) Dividend Yield (High-Low, %) (cont’d)
apf_0507.qxp

Ticker Company Yr. End 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002

FOOTWEAR‡
CROX § CROCS INC DEC 29-12 NA-NA NA-NA NA-NA NA-NA 0 NA NA NA NA 0.0-0.0 NA-NA NA-NA NA-NA NA-NA
DECK § DECKERS OUTDOOR CORP DEC 24-11 18-7 21-7 24-4 37-15 0 0 0 0 0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0
KSWS § K-SWISS INC -CL A DEC 17-10 17-13 15-8 17-7 18-10 9 8 5 3 2 0.9-0.5 0.6-0.5 0.6-0.3 0.4-0.2 0.2-0.1
NKE * NIKE INC -CL B # MAY NA-NA 17-14 20-14 19-12 23-14 NA 21 20 19 19 NA-NA 1.5-1.2 1.4-1.0 1.6-1.0 1.3-0.8
5/14/2007

SKX § SKECHERS U S A INC DEC 19-9 16-10 25-12 NM-NM 19-5 0 0 0 NM 0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0

SRR § STRIDE RITE CORP NOV 17-13 22-16 18-14 19-11 16-11 26 34 29 31 34 2.0-1.5 2.2-1.6 2.1-1.6 2.8-1.6 3.1-2.2
TBL † TIMBERLAND CO -CL A DEC 22-15 17-11 15-11 18-9 19-11 0 0 0 0 0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0
WWW § WOLVERINE WORLD WIDE DEC 20-13 19-14 19-12 16-11 16-11 20 20 17 17 15 1.5-1.0 1.4-1.0 1.5-0.9 1.5-1.0 1.4-0.9
OTHER COMPANIES WITH SIGNIFICANT APPAREL OPERATIONS
1:07 PM

COLM COLUMBIA SPORTSWEAR CO DEC 18-13 18-12 18-14 20-10 18-11 4 0 0 0 0 0.3-0.2 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0
HMX HARTMARX CORP NOV 50-27 16-9 20-9 18-7 30-12 0 0 0 0 0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0

Note: Data as originally reported. ‡ S&P 1500 Index group. * Company included in the S&P 500. † Company included in the S&P MidCap. § Company included in the S&P SmallCap. # Of the following calendar year.
Page 37

Earnings per Share ($) Tangible Book Value per Share ($) Share Price (High-Low, $)

Ticker Company Yr. End 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002
APPAREL, ACCESSORIES & LUXURY GOODS‡
ASHW § ASHWORTH INC OCT 0.61 0.56 0.19 0.22 0.49 5.66 6.63 5.99 J 5.70 J 5.49 J 11.20-7.55 8.70-5.00 9.91-4.54 9.38-4.34 7.88-3.81
COH * COACH INC JUN 0.70 0.41 0.24 0.19 0.11 2.00 1.11 0.67 0.42 J NA 28.85-16.88 20.42-7.26 8.93-4.30 5.34-2.50 3.67-2.00
FOSL § FOSSIL INC DEC 1.28 0.98 0.85 0.64 0.78 6.31 6.05 J 4.89 J 3.87 J 3.25 J 32.37-17.68 20.13-10.63 16.41-8.78 10.38-6.11 11.89-4.67
HBI † HANESBRANDS INC JUN 3.39 2.30 4.73 NA NA NA NA NA NA NA 24.77-17.75 NA-NA NA-NA NA-NA NA-NA
JNY * JONES APPAREL GROUP INC DEC (1.32) 2.33 2.44 2.58 2.59 1.30 (2.23) (1.96) 0.98 0.66 36.10-27.30 37.48-26.47 40.00-33.00 37.44-25.61 41.68-26.18

KWD § KELLWOOD CO # JAN 0.82 0.86 2.41 2.60 1.71 NA 9.57 10.75 13.34 15.58 34.84-23.20 34.65-21.83 45.10-31.32 41.53-22.65 32.50-19.70
LIZ * LIZ CLAIBORNE INC DEC 2.50 2.98 2.90 2.60 2.19 6.86 7.74 7.13 6.73 5.43 44.50-33.40 43.82-33.70 42.47-32.09 38.90-26.23 33.25-23.55
MOV § MOVADO GROUP INC # JAN 1.87 1.05 1.06 0.95 0.85 NAJ 12.50 12.69 J 11.24 J 9.89 J 29.68-17.91 20.38-15.24 19.40-12.78 15.38-8.65 12.60-7.30
OXM § OXFORD INDUSTRIES INC # MAY NA 2.93 2.97 2.47 1.35 NA (1.98) (7.10) (1.47) 12.06 55.20-34.34 57.58-33.34 47.50-34.00 35.83-11.01 15.13-9.75
PVH † PHILLIPS-VAN HEUSEN CORP # JAN NA 2.15 1.20 (0.18) 1.10 NA (6.68) (15.78) (16.10) 5.73 52.90-31.24 35.38-24.11 29.95-16.45 18.20-11.16 16.46-10.35

RL * POLO RALPH LAUREN CP -CL A # MAR NA 2.96 1.88 1.73 1.77 NA 10.35 10.38 10.56 8.93 83.15-45.65 56.84-34.19 42.83-27.28 31.52-19.30 30.82-16.49
ZQK § QUIKSILVER INC OCT 0.76 0.90 0.71 0.54 0.40 0.95 0.30 2.53 2.54 2.03 16.08-11.60 18.12-10.63 15.57-8.19 9.77-6.05 7.13-4.22
UNF § UNIFIRST CORP AUG 2.04 2.26 1.75 1.53 1.40 9.20 8.74 6.73 14.02 12.91 41.63-28.65 45.75-28.00 29.99-23.83 28.27-14.00 28.78-18.68
VFC * VF CORP DEC 4.83 4.65 4.30 3.67 3.26 13.18 8.40 7.14 8.61 10.91 83.10-53.25 61.61-50.44 55.61-42.06 44.08-32.62 45.64-31.50
FOOTWEAR‡
CROX § CROCS INC DEC 1.73 0.52 (0.05) (0.04) NA 4.65 0.76 NA NA NA 50.25-20.32 NA-NA NA-NA NA-NA NA-NA
DECK § DECKERS OUTDOOR CORP DEC 2.52 2.58 2.32 0.91 0.17 12.70 8.65 5.80 (0.00) (1.17) 60.56-27.97 47.25-16.92 49.12-16.90 21.99-3.31 6.30-2.56
KSWS § K-SWISS INC -CL A DEC 2.23 2.20 2.04 1.52 0.78 9.86 7.91 6.42 4.86 3.64 37.81-22.54 36.89-27.52 30.01-17.06 25.18-10.61 13.88-7.84
NKE * NIKE INC -CL B # MAY NA 2.68 2.31 1.79 1.40 NA 11.23 9.77 8.13 7.22 50.60-37.76 45.77-37.55 46.22-32.90 34.27-21.19 32.14-19.26
SKX § SKECHERS U S A INC DEC 1.73 1.13 0.61 (0.31) 1.26 NA 8.56 7.47 6.67 6.85 33.58-14.80 18.19-11.18 15.25-7.51 10.24-5.16 24.40-6.52

SRR § STRIDE RITE CORP NOV 0.94 0.68 0.68 0.65 0.58 4.05 3.95 6.80 6.74 6.35 16.21-11.90 14.69-10.69 12.26-9.60 12.31-7.27 9.30-6.49
TBL † TIMBERLAND CO -CL A DEC 1.70 2.48 2.19 1.66 1.21 7.64 6.93 7.20 5.86 4.89 37.61-24.80 41.01-27.28 33.99-24.35 29.67-15.10 22.98-12.90
WWW § WOLVERINE WORLD WIDE DEC 1.52 1.33 1.15 0.88 0.79 8.19 7.40 7.14 6.54 5.59 30.20-20.26 25.70-18.90 21.66-13.40 14.39-9.53 12.83-8.37
OTHER COMPANIES WITH SIGNIFICANT APPAREL OPERATIONS
COLM COLUMBIA SPORTSWEAR CO DEC 3.39 3.39 3.44 3.01 2.60 21.26 19.18 18.57 15.04 11.72 62.55-42.85 59.76-41.00 62.18-49.22 59.39-31.55 47.80-27.46
HMX HARTMARX CORP NOV 0.20 0.65 0.45 0.26 0.10 6.36 3.61 3.46 3.07 4.57 9.97-5.50 10.48-6.09 8.82-4.05 4.62-1.82 3.02-1.18

Note: Data as originally reported. ‡ S&P 1500 Index group. * Company included in the S&P 500. † Company included in the S&P MidCap. § Company included in the S&P SmallCap. # Of the following calendar year. J-This amount includes intangibles that cannot be identified.

The analysis and opinion set forth in this publication are provided by Standard & Poor’s Equity Research Services and are prepared separately from any other analytic activity of Standard & Poor’s. In this regard, Standard & Poor’s Equity Research Services
has no access to nonpublic information received by other units of Standard & Poor’s. The accuracy and completeness of information obtained from third-party sources, and the opinions based on such information, are not guaranteed.

MAY 24, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY

37
apf_0507.qxp 5/14/2007 1:07 PM Page 38

Topics Covered by
INDUSTRY SURVEYS
Advertising Electric Utilities Movies & Home Entertainment
Aerospace & Defense Environmental & Waste Management Natural Gas Distribution
Agribusiness Financial Services: Diversified Oil & Gas: Equipment & Services
Airlines Foods & Nonalcoholic Beverages Oil & Gas: Production & Marketing
Alcoholic Beverages & Tobacco Healthcare: Facilities Paper & Forest Products
Apparel & Footwear Healthcare: Managed Care Publishing
Autos & Auto Parts Healthcare: Pharmaceuticals REITs
Banking Healthcare: Products & Supplies Restaurants
Biotechnology Heavy Equipment & Trucks Retailing: General
Broadcasting & Cable Homebuilding Retailing: Specialty
Chemicals Household Durables Savings & Loans
Communications Equipment Household Nondurables Semiconductor Equipment
Computers: Commercial Services Industrial Machinery Semiconductors
Computers: Consumer Services & Insurance: Life & Health Supermarkets & Drugstores
the Internet Insurance: Property-Casualty Telecommunications: Wireless
Computers: Hardware Investment Services Telecommunications: Wireline
Computers: Software Lodging & Gaming Transportation: Commercial
Computers: Storage & Peripherals Metals: Industrial

GLOBAL INDUSTRY SURVEYS

Industry/Region Industry/Region
Advertising/Asia, Europe Healthcare: Pharmaceuticals/Asia, Europe
Aerospace & Defense/Europe Healthcare: Products & Supplies/Asia, Europe
Airlines/Asia, Europe Industrial Machinery/Asia, Europe
Autos & Auto Parts/Asia, Europe Insurance: Life & Health/Asia, Europe
Banking/Asia, Europe, Latin America Insurance: Property-Casualty/Asia, Europe
Biotechnology/Asia, Europe Investment Services/Asia, Europe
Broadcasting & Cable/Asia, Europe Oil & Gas: Production & Marketing/Asia, EMEA, Latin America
Chemicals/Asia, Europe Publishing/Asia, Europe
Communications Equipment/Asia, Europe Real Estate/Asia, Europe
Computers: Hardware/Asia Retailing: Specialty/Asia, Europe
Construction & Engineering/Asia, Europe Supermarkets & Drugstores/Asia, Europe
Consumer Electronics/Asia Telecommunications: Wireless/Asia, Europe, Latin America
Electric Utilities/Asia, Europe Transportation: Commercial/Asia, Europe
Foods & Nonalcoholic Beverages/Asia, Europe

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