Opinion: Sector Insight - Menswear - Dressed for success?

Consumer spending on men's clothing has increased 13% in the past five years to reach an estimated £6.6bn in 2004, but with the retail industry struggling, conditions in the sector are tough.

Recent years have seen the growth of retailers' own-label offerings, as well as a shift of the manufacturing to countries where labour is cheap, leading to intense downward pressure on prices. As a result, volume sales have had to rocket to maintain the market's value.

A few large retailers control most of the sector, although value chains and supermarkets have begun to take a bigger slice of the market. Budget clothing chains saw their share of total sales value rise from 11.2% in 2001 to 12.4% in 2004, according to Mintel. Primark and TK Maxx enjoyed significant growth as a result of their value-for-money positioning and expansion strategies.

Among the supermarkets, Asda's share grew from 2.1% to 3.8%, while Tesco's rose from 0.9% to 2% in the same period. Both supermarkets have set out to build strong sub-brands, and Asda is now expanding its George brand through standalone stores.

Despite Marks & Spencer's widely documented problems, its menswear business remains strong. M&S is still the leading retailer in this sector by value, with an 11.7% share. Its Blue Harbour casual range, launched in January 2002, has been a particular success, and is now expanding into the lifestyle sector with Blue Harbour toiletries and accessories.

Broad offer Debenhams is another retailer that has developed strong sub-brands. It has also been at the forefront of bringing designer names to the high street at affordable prices. Debenhams has used this strategy to create segmentation, with separate identities for different areas of the store.

Brands - both retailers such as Next and Gap, and fashion labels such as FCUK - work well in this sector. Among the younger brands performing well are Diesel, Firetrap and Ted Baker.

Supplier brands are still a core business for independent fashion retailers, but with so much competition this sector is being squeezed.

Some brands are trying to adapt to the changes in the market. Levi's, after a bitter battle to stop Tesco selling its jeans at knock-down prices, subsequently developed the Signature range specifically for supermarkets.

This was introduced in April 2004 in Asda stores and is also available in some Tesco Extra stores.

The jeans market suffered in the mid-1990s when it lost youth appeal and was seen as a casual item for middle-aged men. But, led by Levi's, the industry has worked hard to regain the 15- to 24-year-old market.

It has experimented with the type of denim, the finish, the cut and colour to provide a wider choice of clothes and make denim desirable.

Formal fightback

With more relaxed attitudes to dress codes in the office, casual clothing has been performing better than formal wear for some time, though in recent years there have been signs that formal clothes have been growing in popularity.

Sainsbury's, for example, has moved into formal wear, selling suits from £60.

'Formal wear has performed well across the sector because of the fashion for mixing formal and casual looks,' says Maureen Hinton, senior research analyst at Verdict Research.

These trends have affected the men's shirt market, which is worth about £1.5bn. The greater styling and detail of formal shirts have seen them gain popularity as 'going out' wear among young men. Even shirts worn with suits are changing - instead of the traditional mainstay of white, more colours and finishes are now being sold, and recently the trend has been for dark shirt colours.

Future expansion

The men's clothing market will benefit from a growth in the male adult population of 3.2% from 2004 to 2009, with the 20-24 age bracket (who tend to be the highest spenders) increasing by more than 20%. But the projected fall of 11.5% in the 25- to 34-year-old demographic could prove a problem for retailers that target this group, such as Gap, Next and Burton. Overall, Mintel predicts that the men's clothing market will rise by 14% between 2004 and 2009 to reach £7.5bn. Jeans will see the fastest growth of 23%, followed by knitwear at 21%.

But growth should not be taken for granted. Menswear sales can be vulnerable during economic downturns, as menswear is often seen as a lower priority than women's or children's clothes in families. Men are also more likely to spend on high-tech items instead of clothes. Brands still have to work hard to make their ranges desirable.

MARKET SHARES IN MENSWEAR MARKET BY VALUE (%)

2004 2003 2002 2001 01-04

% change

1 Multiple specialists 22.0 22.0 22.4 23.5 -1.5

Next 7.2 7.1 7.0 6.9 0.3

Arcadia 5.3 5.3 5.3 5.9 -0.6

River Island 1.6 1.6 1.6 1.5 0.1

Other 7.9 8.0 8.5 9.2 -1.3

2 Independent specialists 15.6 15.8 16.0 16.6 -1.0

3 Variety stores 15.8 15.8 15.8 15.3 0.5

M&S 11.7 11.6 11.6 11.3 0.4

Bhs 2.7 2.7 2.7 2.5 0.2

Other 1.4 1.5 1.5 1.5 -0.1

4 Department stores 9.2 9.2 9.1 9.1 0.1

Debenhams 4.2 4.2 4.1 4.1 0.1

5 Value clothing specialists 12.4 12.4 12.0 11.2 1.2

Matalan 3.5 3.5 3.5 3.0 0.5

TK Maxx 2.0 1.8 1.7 1.5 0.5

Primark 1.8 1.7 1.5 1.4 0.4

Other 5.1 5.4 5.3 5.3 -0.2

6 Supermarkets 6.4 5.4 4.9 3.6 2.8

Asda 3.8 3.2 2.8 2.1 1.7

Tesco 2.0 1.6 1.3 0.9 1.1

Other 0.6 0.6 0.8 0.6 0.0

7 Mail order

(excl. Next Directory) 4.4 4.6 4.7 4.8 -0.4

8 Others 14.2 14.8 15.1 15.9 -1.7

Source: Mintel

MEN'S SPENDING ON CLOTHES IN PAST 12 MONTHS BY CLOTHING TYPE (%)

All Under £50 £75 to Over

£50 to pounds £100 £100

74

1 Shirts 64.1 49.0 9.3 5.8 n/a

2 Trousers 63.1 40.5 13.6 4.5 4.5

3 Jeans 47.4 32.5 8.5 2.2 3.4

4 Jumpers/pullovers 44.0 34.0 6.4 3.6 n/a

5 Sports clothing 40.4 20.4 9.3 4.5 6.3

6 Jackets 35.0 15.0 11.7 n/a 8.3

7 Suits 20.4 1.5 n/a n/a 15.0

8 Overcoats 11.2 4.3 4.0 n/a 2.9

9 Raincoats 10.8 5.3 3.5 n/a 2.0

Source: TGI, Autumn 2004/Mintel Base: men aged 15 and over

ANALYST COMMENT - DAVID IDDIOLS, SENIOR PARTNER, HPI RESEARCH

The UK men's clothing market is worth more than £6bn, with the vast majority of items on its hangers imported from outside the EU. Big retailers still dominate the sector, but they face a significant challenge from value shops and supermarkets, whose share is rising steadily. They are aided by established brands, such as Levi's, that offer dedicated ranges through such outlets.

At first glance, the market can appear buoyant. Each year sees the arrival of new trendy brands (Bench and Paper Denim being recent examples). Media coverage, through programmes such as Queer Eye for the Straight Guy, adds to the impression that men now take more pride in their appearance.

The reality is less encouraging. While the sector has grown in recent years, it has performed less well than other clothing sectors. In the past five years, the men's clothing market has grown by 13%. This is not bad, but it has only been rising at about half the rate of overall consumer spending, which must be a concern. What is more, the slowdown in retail growth in the second half of 2004, combined with disappointing trading over Christmas, means the whole sector looks vulnerable, especially given that men tend to make clothing a low priority.

The evidence indicates that most males remain reluctant shoppers. The Family Expenditure Survey shows that 40% of spending on men's clothes is undertaken by women. When one considers that 56% of males only go shopping when they need something, it is clear that the concept of 'retail therapy' is alien to the sector.

Yet there is cause for optimism, as the male population will continue to grow, in particular in the high-spending under-25 age bracket.