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Leather Orders Too Much of a Stretch

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TIMES STAFF WRITER

Retailers made a big bet on leather this year--too big, it turns out.

As the Christmas shopping season enters its final weekend, stores are offering huge markdowns in hopes of clearing an overabundance of leather coats, jackets, vests and trousers.

But that won’t be easy. With the economy softening and consumer confidence slipping, many shoppers seem hesitant to plop down money for pricey leather clothing.

“I think it was the mistake of the season,” said Holly Gustafson, an analyst with Legg Mason Wood Walker.

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The biggest mistake was that retailers ordered too much. Because leather clothes sold so well last Christmas and the heavy demand continued into this year, many stores loaded up on all kinds of leather for this holiday season.

That wasn’t all. Analysts say retailers went too far in styles and colors, stocking up on purple trousers and shiny animal-print coats.

Gap Inc., the San Francisco company that also owns Old Navy and Banana Republic chains, stepped up its leather offerings for the fall and winter seasons this year, including red blazers and turquoise pants, said Anne-Marie Lillestrand, an analyst with Thomas Weisel Partners. But such flashy options have a limited appeal, analysts say, and don’t fit into most work wardrobes.

“Leather has some connotations to it,” Gustafson said. “I don’t wear leather to work. And I especially don’t wear purple leather to work.”

Gap has said November margins fell “well below” last year as it has tried to clear out leather and leftover fall products.

Even Baby Gap’s hooded leather coats--tiny enough for a 3-month-old--were marked down to $129.99 from $198 at South Coast Plaza mall in Costa Mesa.

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“The plan was, leather was strong last year, let’s do it this year even bigger, and with a twist,” Lillestrand said. “People just didn’t buy it.”

The leather faux pas comes at a tough time for apparel companies, which have been slogging through a generally disappointing shopping season. They began slashing prices on many products weeks ago.

But leather is even harder to shed because unlike cashmere sweaters, for example, it appeals mostly to young buyers. Trim new styles further narrow the market.

“Snug over a full body is just not a great fashion look,” said analyst Gustafson. “I think the consumer understands that.”

Moreover, even though the Leather Apparel Assn. says most everyone can afford leather clothing, much of what’s hanging on sales racks still appears to be too expensive for many people’s budgets, especially with the stock market sinking and higher energy costs pinching consumers.

“It’s not like a T-shirt or funky sweater,” Lillestrand said.

A walk through upscale South Coast Plaza shows just how deep and wide retailers are marking down leather clothing--from half-off jackets at Macy’s to Emporio Armani’s fur-trimmed leather coat, reduced to $1,798 from $2,998.

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Sears trimmed the price on one collarless jacket to $95 from $136. Still it’s been hard to reel in customers.

On a recent visit to Sears, Barbara Sano stopped for a moment to look over a red leather jacket on a sales rack. But even at 30% off, the 66-year-old retiree wasn’t tempted.

“I wouldn’t buy it because I don’t like the color or the style,” said Sano, who is visiting from England.

Besides discounts, companies are taking other steps to snag buyers.

Guess Inc., a Los Angeles-based jeans designer and retailer that caters to young men and women, had a contest a few weeks ago to “push leather sales through the holidays,” said Rochelle Betancourt, assistant manager of the store in South Coast Plaza.

“We sold hundreds of leathers in the last three weeks,” Betancourt said. “The $199 [jackets] for men, they blew.”

But there are plenty still left. Asked what happens to the leather that’s not sold by Christmas, she said, “We just mark them down.”

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Though that may drive sales, markdowns also hurt profits.

Wilsons The Leather Experts Inc., which claims a 14% share of the leather clothing market, took a can’t-beat-’em-join-’em approach to all the competition this year, moving marked-down merchandise to the front of the store, where the more fashionable, higher-priced goods normally would be displayed, said Chief Executive Joel Waller. That made stores “appear more promotional.”

The Minneapolis-based company is having a strong year so far, Waller said. In November, sales at stores open at least a year were up 13%, compared with 6.8% in the same month last year.

Still, the intensified competition has cost Wilsons some sales, Waller acknowledged. He said the impact was not dramatic.

Certainly, many apparel companies have benefited from leather sales this year, which shot up 71% to $3.2 billion in the first nine months.

Los Angeles-based Adler Leather Inc., which sells imported leather goods to stores such as May Co., TJ Max and Burlington Coat Factory, has seen sales double this year.

But demand “has definitely peaked,” said Jeff Adler, senior vice president of Adler Leather.

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One of the company’s biggest customers originally ordered 10,000 leather jackets and pants in python print--in caramel, black or olive green.

But when it came time to ship, the customer “only wanted half,” he said, adding, “As each day goes by, it’s becoming less valuable.

“You know fashion, when it goes out it really goes out.”

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Leather’s Growth

Retailers loaded up on leather goods, expecting sales to boom during the holidays. Sales jumped dramatically the first nine months of 2000 but have since turned sluggish. Retailers have cut prices to keep cash registers ringing.

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U.S. sales of leather apparel, in billions

First nine months of 2000: $3.2 billion

Source: Leather Apparel Assn.

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