Fashion Notebook

Research Desk: Girls Will Give Up Coffee Before Concealer

The current economic situation may look ugly, but that doesn’t mean women want to. Which, at least, is some good news for marketers and health and beauty retailers.

According to the Allure Beauty Index, an online survey of 1,088 readers of Allure magazine conducted on its Web site in April, 75% of respondents said they would give up other indulgences before they would stop buying their favorite beauty products.

What’s more, 84% of those surveyed said they felt beauty “is a necessity in life.” We know, we know, it is a little bit cringe-inducing, y'know, given what's happening in Myanmar right now, and I don't know, immigrant refugees being burned alive in South Africa. But this is the U.S. peeps, where it's OK to put beauty, and fashion, first. After all, many of our basic needs are met, or at least so the popular media tells us. Plus, there's that big news event of that big big big movie coming out now, guys! It's so big even the international press is getting Carried away. (We promise, no more SATC references. God knows we've had enough of them!)

Sorry, we're getting off track today. More to the point for marketers, 65% agreed with the statement that “you can't put a budget on beauty,” which means charge whatever the f*ck you want for those not-tested-on-animals powders, creams and compounds.         

When asked where they would look to cut back their spending, those surveyed ranked the affected categories as follows:

    •    Dining out: 69%                         •    Home goods 44%            
    •    Jewelry/watches: 59%               •    Clothing: 37%
    •    Electronics: 58%                        •    Automobile: 30%
    •    Entertainment: 51%                        •    Beauty products: 16%
    •    Vacation: 45%

   

Not that Starbucks hasn’t recently been hit with enough ugly financial news, 79% of respondents said they would “eliminate afternoon Starbucks’ runs” in order to be able to afford their favorite beauty products. In addition, 56% said they would alter their vacation plans to free up funds for their beauty needs.               

The survey did have good news for some food retailers: 61% said they would save money by switching to
lower-priced “generic” food brands at the grocery store. That means, like, buying 365 Organic at Whole Foods, right?

Financial Desk: Sales Down, But Earnings Up 40% for Gap, as Retailer Cuts Marketing Budget

We hate to see this, because it means less creative, but cutting its marketing expenses was one tactic that helped Gap bolster its bottom line, even as sales continued their slide into the red.

In addition to other cost cutting measures that included reduced remodeling efforts for Old Navy stores, and a $15 million pre-tax earnings benefit, Sabrina Simmons, Gap Inc.’s EVP/CFO, said in an earnings call late Thursday that “lower marketing expenses” also helped lift earnings 40% to $249 million, for the quarter ended May 3.

So where was the blood spilled in the marketing department?

Well, ad spend dropped almost 18% from the year-earlier period, closing at $93 million for the quarter. The $21 million reduction was due in large part to the absence of TV spots for the Gap brand, Simmons said. However, she added that shareholders and analysts shouldn’t expect such cuts to continue.

“Unlike this first quarter, we expect our marketing expenses in the second quarter to be fairly similar to last year’s level of $88 million,” she said.

Yay! Maybe we'll have some more fun creative to look forward to this summer, when we're all staying indoors and running the air conditioners to escape from global warming. That is, though of us who have TV. (We're luddites, y'all, except when we visit our wife to watch rounds and rounds of Lifetime Movies.)

While earnings might have been a bright spot, and showed the beleaguered firm capable of trimming costs for the benefit of its investors, sales trends showed signs of trouble amid an economic slowdown that has the whole retail industry reeling. Comp store sales at Gap North America dropped 7% for the quarter to $976 million, and Old Navy posted an 18% decrease, dropping to $1.2 billion in sales.

If you don't have your financial party hat on, folks, that means, pretty much, "things sucked  over the past three months." Which is too bad for Old Navy, because we, (and the wife), LOVE those new ads. It's like Gossip Girl meets Fred Flare's Crafternoon Delights. Seriously, some fierce-ass dresses that might have the retailer beating Forever 21 at its own game. Seriously, if you haven't seen these ads (also screen-grabbed, above, right), they just might change the way you view Old Navy. They did for us.

Meanwhile, on the richer side of things, Banana Republic's comp store sales dropped 4% to $538 million and Glenn Murphy, chairman and CEO,  said that the brand had been affected by challenging traffic trends, and an “uncharacteristically promotional” environment at the apparel chain’s direct competitors. Thus far, Banana Republic has avoided playing the promotional card to drive sales.

“We’re watching the competitive landscape very closely,” added Murphy. “And [we] are prepared to make the necessary adjustments to drive traffic if this promotional level that we are seeing currently was to continue.”

Yay SALES that are sure to come. Because, honey, that's a brand for the aspirational rich, not the real rich, and we ain't getting any more money any time soon. That is, until Obama is in the White House, but we don't want to get political. We just want good health care, education, and leadership that will get us out of this war, y'know, in less than 100 years. But we digress.

Net sales for the company dropped about 5% to $3.38 billion for the first quarter. The company has maintained its guidance for fiscal 2008 earnings per share to fall in the range of $1.20 to $1.27.