Topshop hits US market at difficult time
Wed Apr 1, 6:43 pm ET
Mae Anderson, Ap Retail Writer

NEW YORK – For months, young fashionistas have been feverish over the opening of an outpost of successful British fast-fashion retailer Topshop in Manhattan's SoHo neighborhood Thursday.

The newest participant in the invasion of affordable chains such as Zara, Mango and H&M, Topshop has won raves for its cheap-chic clothes. Like other fast-fashion retailers, most of which are based abroad, it thrives on bringing fashion to stores quicker and cheaper than mainstream retailers traditionally have.

The strategy seems to be muting the worst effects of the recession. The largest of the newcomers — Zara's Madrid-based owner, Inditex — is even threatening Gap Inc.'s status as the world's largest apparel retailer.

"Gap has been underwater for six or seven years," said New York retail industry consultant Howard Davidowitz. "Along comes fast fashion — H&M started it — and it's a revolution."

Fast-fashion shops fill a niche where Gap simply can't compete, he said — and that compounds the challenges it faces from other retailers and the economy.

Inditex reported last month that its annual sales rose 10 percent to $13.4 billion, while Gap's 2008 sales of $14.53 billion were nearly 8 percent below 2007.

Still, fast fashion is not a magic formula for avoiding the recession. H&M — founded in Sweden in 1947, it arrived in the U.S. in 2000 — reported its fourth-quarter earnings fell 12 percent, further than expected. And Inditex is scaling down plans to open more stores.

Originally scheduled to open last fall, Topshop's New York flagship store spans four floors. Its 25,000 square feet of selling space will include a collection headlined by model Kate Moss in its own boutique and be graced by a DJ booth hanging from the ceiling.

Topshop executives have said this store is the first of up to 15 they plan to open in the U.S. — there are about 300 stores in the U.K. — offering trend-savvy teens and twentysomethings everything from animal print leggings for $40 to a floral-print tea dress for $90.

"New York is one of those first three or four cities that every fashion brand wants to operate in," said Sir Philip Green, owner of Topshop's parent company, Arcadia Group.

Fast-fashion chains offer shoppers two key propositions: They make the trendiest styles affordable, and they bring fashion to market fast.

They design, manufacture and deliver their youth-oriented, up-to-the-minute stock to stores worldwide within weeks — in contrast with the months of lead time department stores and most traditional retailers require. For example, Topshop's interpretation of the high-heel lattice-caged sandals in style this spring cost $145. That's pricey, but it's nothing compared to similar Yves St. Laurent booties selling for more than $1,000.

Zara and Topshop offer some pricier items, such as a $250 fringed suede dress at Topshop, but most prices are low — particularly at H&M and Forever 21, where T-shirts can sell for a few dollars.

Fast-fashion chains also benefit from a wide and shallow selection that helps clothes move quickly. Retailers like Gap Inc., J. Crew Group Inc. and most specialty apparel chains stateside tend to have a narrower and deeper assortment, which can necessitate heavy markdowns if sales are slow.

Forever 21 Inc., founded in 1984 in California, is the biggest U.S.-based fast-fashion retailer, with annual revenue of $1.05 billion, according to Capital IQ, a division of Standard & Poor's.

But other U.S. retailers are trying to deliver new products faster.

American Eagle Outfitters Inc. said it is shipping new items to its stores every two weeks ahead of the Easter holiday as a "key element" to driving sales. Abercrombie & Fitch said during a conference call about its latest earnings that it is operating on shorter lead times than in the past.

Teenage research firm TRU vice president Michael Wood says teens now take fast-fashion nearly for granted.

"The pressure is going to be on all retailers to change up product more often," he said. "The expectation is going to be there."


Associated Press Writer Samantha Critchell in New York contributed to this report.

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