Riding Hip Jeans into New Luxury Markets

Denim used to be a way for high-end fashion designers to go mass, but a new generation of brands is using $150 jeans to launch upscale lifestyle brands

by Reena Jana

Premium-denim jeans makers such as 7 for All Mankind have seen skyrocketing sales. Here, a pair of men's 7 jeans, featuring the company's signature back-pocket stitching.

The latest trend among premium-denim companies: expanding into clothing. Here's a full, Fall 2007 outfit from jeans-maker Citizens for Humanity.

Rock & Republic is now offering upscale accessories, like these sunglasses, to compliment its upscale jeans.

Rock & Republic is also branching into footwear, seen here, and plans on launching cosmetics and even a hotel in the future to build its brand.

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You might think that for a young brand, netting $100 million in sales of $100-plus jeans is a sure sign of success. And indeed, labels such as True Religion (TRLG), Rock & Republic, Citizens of Humanity, and 7 for All Mankind have graced the pages of fashion bibles like Vogue and Elle, and are sold in high-end stores from Saks to Barneys New York.

But for this new generation of fashion startups, "premium"—or $100-plus—jeans are just the springboard for launching upmarket lifestyle brands. Many are entering 2007 by offering expanded lines of clothes, accessories, outerwear, eyewear—even a hotel—that they hope will boost customer loyalty and fully establish them as multicategory brands.

Of course, today's designer jeans phenomenon isn't the first wave of premium denim to hit shelves since the first blue jeans were made, patented, and sold to laborers by Levi Strauss & Co. in 1873. But contemporary premium jeans companies are setting their brands apart from the designer jeans businesses of the 1980s rather than emulating their models.

Premium denim's first wave was led by fashion designers Gloria Vanderbilt and Calvin Klein, well-established names who used jeans to court mass-market audiences. They saw jeans as a less expensive fashion item that could conspicuously display their name on the back pockets. Today's denim executives are deploying the opposite strategy: building high-end brands from the blue jeans up—and using their staggering sales growth to fund luxury clothing and accessories lines.

A New Status Symbol

The success of these ambitious young jeans makers, who have seen sales double or triple in the past year, stands in particular contrast to the fate of the well-known traditional jeans maker, Gap (GAP), which is floundering (see BusinessWeek.com, 1/5/07, "Sales Gap at the Gap") with falling sales and talk of a buyout. In fewer than 10 years, these companies have effectively—and collectively—established a new category that's not quite luxury, and not quite downmarket weekend wear, but something in between.

"Consumers now see blue jeans as an investment and will pay more for them. They're a staple in a person's work wardrobe. Steve Jobs of Apple (AAPL) is always photographed wearing jeans," says James Sullivan, author of Jeans: A Cultural History of an American Icon (Gotham Books, 2006).

Sales of premium denim provide proof of jeans' popularity. True Religion, for example, saw net sales increase 41.8%, to $109.3 million, in the nine-month period ending Sept. 30, 2006, up from $77.1 million in the same period the year before. These are striking figures, especially compared to those from the company's first year in business. True Religion brought in $2 million in 2003.

Lifestyle Branding

The company recently announced licensing agreements for scarves, footwear, and outerwear, making clear its intention to become a global lifestyle brand. And Rock & Republic, which saw estimated growth of 270% in 2006 from its $100 million sales in 2005, launched an accessories line of men's and women's shoes, bags, and eyewear at the end of last year. The company expects to expand into cosmetics and even a chic Rock &Republic boutique hotel in 2007.

"Adding accessories and clothing to build a lifestyle brand can work for those jeans companies with a strong customer following," observes Marshal Cohen, a retail analyst with market researcher NPD Group. "To be a one-trick pony in today's world is risky and limits growth, which every company in any market is judged on. But the brand has to be strong, otherwise the expansion is capricious."