Clothiers likely to find success in children's market

The Outlook

Abercrombie, Limited are planning expansions

June 06, 1999|By Shanon D. Murray

SPECIALTY CLOTHING retailers Abercrombie & Fitch Co. and the Limited Inc. both recently announced that they will expand their presence in the $30 billion children's clothing market, hoping to find the same success Gap Inc. is experiencing with its profitable GapKids concept.

Abercrombie expects to open about 20 of its children's stores this year and sees the business fattening earnings by fiscal 2000. The stores will carry boys' and girls' clothing designed for ages 7 to 14.

Limited Inc., which also owns Express, Lerner New York and Lane Bryant clothing stores as well as Limited Too -- which targets girls from about ages 7 to 14 -- has 288 children's stores, and plans to open about 80 more in the next two years. The company also plans to spin off Limited Too in an initial public offering.

What's so attractive about the kids' market? Are these retailers taking a risk trying to mimic GapKids? What does this newfound interest mean for more traditional kids' clothing retailers like Kmart, Target and Wal-Mart?

Elizabeth O. Pierce

Analyst, the Seidler Cos., Los Angeles

This is a great move for those companies. The demographics are very good for the 7-to-14 age group. There are lots of kids out there to support the concept. They are watching what their older siblings and friends are wearing, and they want the same thing.

Also, parents are willing to pay more for a garment than what an Old Navy or mass retailer may sell it for because they appreciate a good quality of clothing. Department stores and mass merchants don't offer the same level of fashion that specialty stores do.

It won't be a stretch for Abercrombie & Fitch to expand into the children's market. Their stores will replicate merchandise, fixtures and signage. It will parallel what Gap did with GapKids, which downsized the Gap silhouette and created a smaller version.

Lucy Effron

Director, Apparel Division, NPD Group Inc., market research firm, Port Washington, N.Y.

One of the big things for manufacturers and retailers is to develop brand-loyal customers, and by moving down in age, they can develop brand loyalty earlier. There have been some strong successes like the Gap, while some others have not been successful. The ones that seem to be the more successful are the ones that are more lifestyle-driven. It's always better to market to a lifestyle as opposed to a certain demographic.

The only risks anyone has in the children's market is thinking it's bigger than it is. The kids' market tends to be 0- to 14-year-olds. That's a lot smaller than 15- to 100-year-olds, by virtue of sheer population. A retailer should go in with expectations that are somewhat smaller.

Howard Davidowitz

Chairman, Davidowitz & Associates, national retail consulting firm, New York

What is happening is Americans have gotten much richer. It's that simple. We have a booming economy, and as part of that, people are spending more on their kids. Parents will spend their money at GapKids, although it may be more expensive than Wal-mart. And if it worked for the Gap, why wouldn't it work for Abercrombie & Fitch? The Limited has already reached that success with Limited Too. But, of course, with every business decision, there are risks. Can Abercrombie fall on its face? Sure. Could the children's market turn down? Sure. Could there be too many players? Sure. Could Abercrombie make mistakes in stylings and coloration? Sure.

Mistakes can happen in a lot of ways. Limited Too was not an overnight success. The Limited worked on the concept for many years. At the beginning, the company had all kinds of problems with their products.

But going after the children's market is a good idea. For many chains, it's a diversification move. It gives them a growth vehicle. That's why the Limited and the Gap did it. It's necessary to keep the momentum and the stock price up.

Pub Date: 6/06/99

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