Clothes Firms Hail Quotas' End
Those pants you are wearing should cost a lot less to make next month. That's when import quotas on foreign-made apparel are due to expire around the world. It is a development welcomed by the global fashion business, but could create new pressures on U.S. apparel makers.
Elimination of the quota system is expected to reduce apparel costs for U.S. companies by as much as 15%, mostly because big clothing manufacturers will be able to use fewer overseas factories. That should be good news for big American companies such as Liz Claiborne Inc., VF Corp., Polo Ralph Lauren Corp. and Jones Apparel Group Inc.
Manufacturers are salivating over the savings, hoping to translate the windfall into fatter profit margins and better quality clothing, a fast-growing segment of the apparel market.
Still, some on Wall Street are pessimistic about the long-term effects the end of quotas will have on the apparel sector. Import limits are ending at a time of massive oversupply of clothing, which has helped to gradually force clothing prices lower in recent years. Some analysts worry that the expiration of the quota system only will make things worse, exacerbating price declines, maybe not immediately, but certainly over time.
A STITCH IN TIME
See an interactive graphic detailing what the expiration of import quotas will mean to the apparel industry.
The end of the quota system is a "long-term marginal negative" for the apparel industry overall, Merrill Lynch analyst Virginia Genereux wrote in a research note earlier this year, citing the risk of further price deflation. Ms. Genereux has a "buy" on Polo stock, and "neutral" ratings on Jones Apparel, VF and Liz Claiborne.
"There is a window here where people will capture some extra margins," says Fernando Silva, a vice president of Kurt Salmon Associates, a consulting firm. "But it's not going to last more than 18 months. There is just too much supply around the world."
Not all companies are equally exposed to any falling prices, though. Companies such as Liz Claiborne, Jones Apparel, Polo and VF can use their greater scale and greater proportion of high-end brands to withstand price pressure, says Noelle Grainger, an analyst with J.P. Morgan. She says smaller players, such as Kellwood Co. and Phillips-Van Heusen Corp., could feel pressure to lower prices sooner and more steeply, reflecting their increased exposure to the moderately priced and mass-market retailers, where competition is most intense.
About 74% of Liz Claiborne's revenue comes from "better" priced clothing and other items, according to a J.P. Morgan analysis. Only 30% of Phillips-Van Heusen's business comes from better priced clothing, and only 5% of Kellwood's business. A spokeswoman for Kellwood says the company's better-priced business now stands at 10% of revenue. Ms. Grainger has an "overweight" rating on Jones Apparel and "neutral" ratings on Liz Claiborne, VF, Kellwood and Phillips-Van Heusen.
Under the quota system, in place since the early 1970s, developed markets such as the U.S. and Europe limited how much apparel could be imported from less-developed markets. Certain factories in these less-developed countries, such as China, have quotas that give them the right to export a certain amount of apparel.
Production costs are about 10% higher because apparel makers have to use more factories than they would otherwise, estimates Bob Zane, senior vice president of New York-based Liz Claiborne. The per-item cost of obtaining quota adds an average of about 5% to manufacturing costs, Mr. Zane says.
The system is due to expire Dec. 31, although the impact could be reduced somewhat because China decided earlier this month to levy a tax on some clothing exports. The U.S. also is weighing some temporary restrictions.
About $30.8 billion of imported apparel, or nearly half of all imported apparel, was subject to quotas in the 12 months ended in September 2004, according to the Commerce Department.
Individual companies are affected differently, depending on the type of apparel they make. Only about a quarter of apparel imported by VF is subject to quota, for example, whereas 55% to 65% of apparel sold by Liz Claiborne is subject to quota limits, according to executives at the two companies. VF has a higher concentration of denim and underwear, which it makes in countries subject to fewer or no quota limits. Liz Claiborne, by contrast, makes a lot of its clothing, such as women's jackets, in markets subject to stricter quota limits, such as China.
To import enough apparel, U.S. companies such as VF and Liz Claiborne produce through independent factories in as many as 40 countries. That will change over time once the quota system ends. Liz Claiborne plans to reduce by about half the number of countries in which it operates, says Mr. Zane. VF expects to concentrate the bulk of its production sourcing in just 10 countries in the next few years, down from about 40 today, says Tom Glaser, managing director in charge of global sourcing at VF.
Fewer, better factories should lead to shorter turnaround time, says Peter Boneparth, chief executive of Jones Apparel, increasing the odds that apparel marketers will have the right product in stores at the right time.
Besides sweetening their bottom lines, apparel makers hope to use the cost savings from the end of the quota system to better take advantage of booming demand for luxury goods. "The consumer has voted," says W. Lee Capps III, chief financial officer of Kellwood. "They're saying they want more fashion." To capture a bigger share of the higher-end market, Kellwood, the maker of moderately priced women's brands such as Sag Harbor and Koret, recently has diversified. It acquired the Phat Farm urban label earlier this year and also recently began producing clothing under license for Calvin Klein.
Likewise, Liz Claiborne and Jones Apparel say they intend to invest at least part of any savings in better fabrics or trims, such as nicer buttons or other details, to improve the quality of their offerings.
But the companies haven't given details yet of any plans, saying there is too much uncertainty about the implications of the end of the quota system. "The theory is we will all be more profitable," says Mr. Boneparth of Jones. "But it is an overly simplistic view of the world to say that quota will automatically take everybody's margins up by whatever you had to pay before," he says. Raw-materials prices are going up. "You can't just say, 'By the way, your costs are going to go down by the collapse of quotas.' "
Ultimately, some apparel executives and analysts argue, it will be competition among retailers, not apparel suppliers, that will determine whether companies will succeed in retaining the quota savings, or whether they will be forced to pass that savings on to consumers in the form of lower prices.
As a result, investors so far aren't reacting to the end of the quota system. Apparel stocks tend to trade in line with apparel-sales trends, analysts say. Some of the stocks that stand to benefit the most, such as Liz Claiborne, already have a premium valuation to other apparel stocks.
In general, apparel stocks have outperformed the broader market so far this year, thanks largely to fast sales of colorful new fashions introduced last spring. In 4 p.m. composite trading yesterday on the New York Stock Exchange, Liz Claiborne stock was down two cents at $40.86, near a 52-week high of $42.35. Jones Apparel was down 27 cents at $35.83, near a 52-week low of $33. VF was down 19 cents at $54.01, near a 52-week high of $55.29. Polo Ralph Lauren was up 44 cents at $39.66, just below a 52-week high of $40.94.
Still, there may be some opportunities. David Griffith, a senior analyst with Tradition Asiel Securities, has a "buy" rating on Jones Apparel, which is expected to benefit from the end of the quota system. The company, which has a market capitalization of about $4.4 billion, only recently has entered the luxury business through its acquisition last month of upscale retailer Barneys New York.
Its stock, which has been hurt lately by weaker sales of footwear and questions about the Barneys acquisition, is trading at a multiple of about 12 times 2005 estimated First Call consensus earnings. That compares with multiples of between 13 for Liz Claiborne and 14 for Polo. In contrast, a smaller apparel company such as Kellwood, whose stock has been hurt lately by weak sales of moderate apparel, trades at a multiple of 11.
服装业为取消配额制欢呼雀跃
美国人爱穿的牛仔裤从下个月开始可能会便宜不少，因为到那时，全球范围针对外国进口服装的配额制将寿终正寝。世界各地的服装企业对此欢呼雀跃，但美国的服装生产商却可能会感受到新的压力。
配额制取消后，预计美国服装企业的成本会下降15%左右，这主要是因为到时候大型服装生产商就可以减少他们签约的海外加工厂的数量了。对于Liz Claiborne Inc.、VF Corp.、Polo Ralph Lauren Corp.和Jones Apparel Group Inc.等美国大企业来说，这应该是个好消息。
生产商对于能够节约成本早就垂涎欲滴，他们期盼由此获得更丰厚的利润，同时也能得到更高质量的服装供应，而这类服装正是市场上增长最迅速的一块。
不过，有些华尔街人士对取消配额制的长期效果并不乐观。在配额制行将取消之际，由于近年来大量服装充斥市场，目前服装价格已被压得很低。一些分析师担心，取消配额制只会让这种现象雪上加霜，造成价格进一步滑坡。这种现象即使不会立刻出现，也是迟早的事。
美林分析师杰纳雷(Virginia Genereux)在今年早些时候的研究报告中说，服装价格有进一步下降的风险。对服装业而言，取消配额制“长期而言对企业毛利润率有一定的负面影响”。杰纳雷对Polo的股票评级是买进，对Jones Apparel、VF和Liz Claiborne的评级是中性。
咨询公司Kurt Salmon Associates的总裁席尔瓦(Fernando Silva)说，取消配额后生产商确实有可能获得额外的毛利，但这种效果的持续时间不会超过18个月，因为世界各地服装市场总体上都供大于求。
不过，不同类型的公司受价格下跌的影响程度有所不同。JP摩根(J.P. Morgan)分析师格莱格(Noelle Grainger)说，比如Liz Claiborne、Jones Apparel、Polo和VF可借助规模效应以及它们的产品中高档服装比例较大的优势来规避这种影响；而规模较小的公司如Kellwood Co.和Phillips-Van Heusen Corp.很快就会感受到降价的压力，而且降价的幅度会很大。中低档大众化市场的竞争是最激烈的。
据JP摩根的分析报告，Liz Claiborne的收入大约74%来自中高档价格的服装和其他产品。Phillips-Van Heusen这个比例只有30%，而Kellwood只有5%。
Kellwood发言人说，该公司中高档服装在总收入中的比例是10%。格莱格对Jones Apparel的评级是增持，对Liz Claiborne、VF、Kellwood和Phillips-Van Heusen的评级是中性。
根据上世纪70年代初以来实施的配额制，美国和欧洲等发达市场会限制从欠发达市场进口的服装数量。中国等欠发达国家的部分工厂需要获得配额，才能具有出口一定数量服装的权利。
Liz Claiborne的高级副总裁赞恩(Bob Zane)估计，由于服装厂商需要使用比没有配额制时更多的工厂，因而生产成本大约会高出10%。赞恩说，获得配额的单位成本使得制造成本平均增加了约5%。
配额制定于12月31日取消，但由于中国本月初时表示，将对部分出口服装征税，取消配额的影响可能会有所减小。美国也正在考虑采取部分暂时性限制措施。
根据美国商务部(Commerce Department)的数据，在截至2004年9月份的12个月中，约有308亿美元的进口服装受到了配额限制，约占所有进口服装的一半。
每家公司受到的影响也不尽相同，这主要取决于他们生产的服装类型。比如，VF和Liz Claiborne的管理人士分别表示，VF进口的服装中，只有约四分之一受配额影响，而Liz Claiborne销售的服装中，约有55%-65%受到配额制的影响。VF主要进口棉布和内衣，生产这两种产品的国家受配额影响很小，甚至不受配额影响。而Liz Claiborne则生产女式夹克等服装，生产这类产品的中国等国家受到了严格的配额限制。
为了进口足够的服装，VF和Liz Claiborne等美国公司要在多达40个国家的独立工厂中进行生产。随著配额制的取消，这一切会逐步发生改变。赞恩说，Liz Claiborne计划将设厂的国家数量降低约一半。VF负责全球采购的董事总经理格拉泽(Tom Glaser)则表示，VF预计今后几年将把主要的产品采购集中到大约10个国家中，低于目前的40个国家。
Jones Apparel的首席执行长博纳帕斯(Peter Boneparth)说，工厂量的下降和质的提高将缩短交货时间，增加服装销售商在适当的时间销售适当产品的可能性。
除了利润得以提高之外，服装生产商希望通过取消配额制带来的成本下降更好地把握豪华商品需求增长的时机。Kellwood的首席财务长卡普斯(W. Lee Capps)称，消费者会表达他们的意见，他们会说他们想要更流行的时装。为了在高端市场获得更高的占有率，以生产Sag Harbor和Koret等中档女装品牌为主的Kellwood最近采取了多元化经营的策略。该公司今年早些时候收购了Phat Farm商标，最近也开始根据授权为Calvin Klein生产服装。
同样，Liz Claiborne和Jones Apparel表示，他们打算至少将部分结余投资于更好的面料和装饰中，以改善产品质量。
但这些公司尚未公布任何详细的计划，他们称配额制的取消仍可能带来许多不确定性。Jones的博纳帕斯称：“理论上讲，我们的利润都会更上一层楼。但要说配额制的取消会自然而然地降低以前的支出，提高利润率，显然是一种过于单纯的观点。”原材料价格正在上涨。“因此，无法说，配额制的取消将带来成本的下降。”
部分服装业管理人员及分析师称，最终的结果是零售商之间，而不是服装供应商之间的竞争，这将决定公司是否会真正获得配额取消所带来的成本节约，还是将被迫通过降价把这种节约让利给消费者。
因此，投资者迄今为止尚未对配额制的取消作出反应。分析师称，服装类股的表现会与服装零售趋势保持一致，这从Liz Claiborne等可能从流行趋势中获利最大的股票上可以体现出来，该股价格高于其他服装类股。
总而言之，2004年至今，服装类股的表现超过了总体市场，这主要是由于春季时五彩缤纷的新服装款式受到了消费者的追捧。纽约证交所周三，Liz Claiborne下跌2美分，收于40.86美元，接近其52周高点42.35美元。Jones Apparel下跌27美分，收于35.83美元，接近33美元的52周低点。VF下跌19美分，收于54.01美元，接近55.29美元的52周高点。Polo Ralph Lauren上涨44美分，收于39.66美元，低于40.94美元的52周高点。
但其中也存在不少机会。Tradition Asiel Securities的高级分析师格里菲斯(David Griffith)对Jones Apparel的评级为买进，该股预计将从配额制取消中受益。Jones Apparel的市值约为44亿美元，最近通过上个月收购的高档服装零售商Barneys New York进入了豪华品牌业务。
其股票最近一直受到鞋类销售疲弱和Barneys收购问题的打击，目前股价约为First Call普遍预计的2005年收益的12倍。而Liz Claiborne和Polo的本益比分别为13倍和14倍。那些较小的服装公司，如Kellwood的本益比为11倍，该股近期一直受到中档服装销售低迷的打击。
