Designer denim is defying the downturn

Morgan just bought a pair of $100 Madewell jeans, but her denim nirvana comes from True Religion Apparel Inc. of Los Angeles. Even at $170 to more than $300, the designer dungarees represent a sacrifice she's willing to make despite the fraying economy.

Morgan, 33, who owns five pairs of True Religion Brand jeans, said, "For women in Los Angeles, who wear jeans almost all of the time, it's an investment. If I wear them every day, they really are not that expensive."

While consumer spending remains woefully depressed, designer jeans have been one of the few bright spots, according to NPD Group, a market research company.

Sales of premium-brand jeans rose 17 percent during 2008 and eked out a 2.3 percent increase in the most recent three-month period that ended in February, making premium denim one of a few "pockets of growth in an otherwise fizzling fashion market," NPD said.

"That is the time period that was the most challenging in terms of consumer spending, so any growth during that time is significant," said Marshal Cohen, NPD's chief industry analyst. "With the newfound focus on fit by some of the commodity brands coupled with women's never-ending quest for the perfect pair of jeans, the passion for denim is alive and well."

Denim is one area in which some of the most fundamental rules of the global economy don't appear to apply. Other industries turn to the least expensive foreign labor pools for production. Jeans makers have found that the high cost of US manufacturing is actually a selling point.

"In the US, people care that their jeans are manufactured here," said Eric Beder, an analyst for Brean Murray, Carret & Co. "To consumers outside the US, it's crucial. Jeans are considered an American tradition. To be considered a real premium brand, you need to have the 'Made in the USA' label on it."

Adriano Goldschmied, the Italian designer of European jeans brands Diesel, Replay, Goldie, and Rivet, agrees.

"Nothing more than jeans represent the spirit of America," Goldschmied said.

Denim buyers aren't going to pull the US economy out of recession, but "it does show that there are people out there who are willing to pay for this sort of thing," Beder said. "It's a relative bargain. The most you are going to pay is $200 to $300. It's affordable luxury. It lasts, and it has a lot of versatility that other clothing items do not have."

Karen Short, an analyst with Friedman, Billings, Ramsey, said that this year has been tough for even the most resilient brands. Short noted that it is difficult to maintain sales at boutiques when they're folding.

Recent financial results show that the few publicly held makers of premium jeans are holding up fairly well.

True Religion beat analysts' expectations with first-quarter net income that increased 10 percent to $7.6 million and net sales that rose 19 percent to $63.6 million, year over year. Joe's Jeans Inc., a Los Angeles-area company whose pants retail for $120 and up, saw net income more than double to $800,000 and sales increase 8 percent to $16.5 million. Guess Inc. posted a 12 percent boost in adjusted net earnings of $55.3 million, excluding a $22.3 million non-cash impairment charge, and a 9 percent increase in revenue to $561.1 million in its most recent quarter.

"The most important thing about my jeans is the fit," said True Religion chief Jeffrey Lubell, whose products are made in Los Angeles. "I try to make your jeans feel like they have been in your closet for 30 years."

At the recent opening of a True Religion store in a Los Angeles shopping center, the retailer's 51st, Scott Icenogle, a marketing director at MGM, bought a pair of straight-leg Ricky jeans. Icenogle, 39, said he was treating himself after getting a break on his 2008 taxes.

"They fit me well, and I know they are going to last a long time," Icenogle said.