Jeans flood U.S. market but are they a good fit?

By Alexandria Sage - Analysis

SAN FRANCISCO (Reuters) - Just one glance at store windows at any U.S. mall might lead you to think that jeans -- classic, distressed and everything in between -- are the salvation the apparel industry has been waiting for.

That may be the hope, but the recent strength of denim in a tough sales environment doesn't make jeans a good fit for all. Industry insiders expect some apparel chains to end up discounting their denim to move it out of stores, though lean inventories should mitigate some of the risk to profits.

As Gap Inc (GPS.N) promotes its new "Gap 1969" jeans with eye-catching window displays, a host of disparate rivals from AnnTaylor Stores Corp (ANN.N) to Guess Inc (GES.N) are upping the ante on the $12 billion apparel category, whose sales grew 8 percent in the 12 months ended June, according to research firm NPD Group.

"It's definitely more popular and retailers are using it to drive traffic," said Brean Murray, Carret analyst Eric Beder. "We're seeing denim go to places you'd be surprised to see it."

Whereas Gap, Levi Strauss and Liz Claiborne Inc's (LIZ.N) Lucky Brand built their brands around denim, others like Coldwater Creek Inc (CWTR.O), a seller of traditional women's apparel, or Cache (CACH.O), best known for dresses, are now testing out the category as well.

They're buoyed by denim's strength in the recession. Shoppers are foregoing other clothing choices for jeans, which can be worn often, on both casual and dressy occasions.

Kenneth Cole, known for menswear, has added hip jeans styles for women, and even the windows at buttoned-up Brooks Brothers feature a mannequin wearing denim.

"The question remains, is Ann Taylor the best place to buy denim? Is Cache the best place to buy denim?" asked Beder, adding: "It's going to get discounted because there is too much of it."