Retailers seek ways to become recession-proof

By Alexandria Sage

DANA POINT, California (Reuters) - Apparel retailers may be facing a doom-and-gloom sales environment in the near future, but many are anxious to prove to a skeptical marketplace they have got what it takes to be recession-proof.

Some retailers such as VF Corp (VFC.N) and J Crew Group Inc (JCG.N) cite conservative inventory management, international exposure and exclusive one-of-a-kind product as reasons to feel positive even as others such as Quiksilver Inc (ZQK.N), New York & Company Inc (NWY.N), and American Eagle Outfitters Inc (AEO.N) have cut their profit expectations.

Virtually all sellers and makers of clothing at this week's ICR Xchange Conference noted the tough times, in which U.S. consumers have pared back spending due to the credit crunch fallout, a housing slump and high gasoline prices.

"These are financial times that one should not be cavalier about," American Eagle Chief Executive Jim O'Donnell told Reuters, adding the company, like many others, was being more diligent about inventory control.

VF's new chief executive, Eric Wiseman, summed up things more ironically, saying he began his job hoping for "people just falling all over themselves to get into the stores to buy apparel."

"The second thing I wished for was kind of unprecedented, confidence in the sector by the investment community. It's been a blast the last two weeks in this assignment," Wiseman deadpanned.

The Dow Jones U.S. Retail Index .DJUSRT is down 7 percent since January 1.

Falling stock prices are hitting the healthy and struggling alike. Teen retailer Aeropostale Inc (ARO.N), for example, raised its fourth-quarter earnings view last week. Still, shares are down 18 percent since then.

"These retail stock prices are discounting worse economic conditions than we're currently experiencing," said Senvest International's Richard Mashaal, who manages some $300 million in equities in small- and mid-cap companies.

"No one's going to be immune," he said of the downturn, adding: "The guys who are already on the down-swing will get hit more."

Less hard hit are companies such as licensing company Iconix Brand Group Inc (ICON.O) and VF, which have many brands appealing to different consumer segments.

"We try to diversify our portfolio so that, if there's any one hiccup along the way, we'll continue to show good profits," said Iconix CEO Neil Cole, who added that 70 percent of the company's revenues are guaranteed through royalties.

Another positive is international exposure, which is helping companies such as Guess Inc (GES.N) and underwear maker Warnaco Group Inc WRNC.O, which has half of its business outside the United States.

Demand for American brands abroad becomes more crucial if domestic consumers are not buying, as Senvest's Mashaal noted: "We want brands that will be bought internationally. You don't want to be betting on the U.S. consumer."

But exciting, differentiated product is the best way to ensure sales, as seen with companies such as True Religion Apparel Inc (TRLG.O), American Apparel Inc (APP.A) and J Crew, which touts its quality and style and has seen higher-than- expected sales and higher profit margins.