PEST Analysis: Mexx Clothing
MEXX is a clothing brand owned by Liz Claiborne. It’s headquarter is located in the Netherlands. MEXX offers a wide range of men’s, women’s and children’s fashion apparel under several trademarks for sale outside of the United States, principally in Europe and Canada. MEXX has existing licensing agreements for fragrances, eyewear, watches, bed and bath products, carpets, socks, stationery and footwear.
Liz Claiborne (the owner of the MEXX brand) sources most of its products outside the United States through arrangements with independent suppliers in approximately 44 countries as of January 2, 2010. There are a number of risks associated with importing its products, including but not limited to the following:
· The potential reimposition of quotas, which could limit the amount and type of goods that may be imported annually from a given country, in the context of a trade retaliatory case
· Changes in social, political, legal and economic conditions or terrorist acts that could result in the disruption of trade from the countries in which MEXX’s manufacturers or suppliers are located
· The imposition of additional regulations, or the administration of existing regulations, relating to products which are imported, exported or otherwise distributed
· The imposition of additional duties, taxes and other charges on imports or exports
· The enactment of new legislation of the administration of current international trade regulations, or executive action affecting international textile agreement, including the United States’ reevaluation of the trading status of certain countries and/or retaliatory duties, quotas or other trade sanctions, which, if enacted, would increase the cost of products purchased from suppliers in such countries
Any one of these or similar factors could have a material adverse effect on MEXX’s business, financial condition, liquidity, results of operations and current business practices. The company’s ability to realize growth in new international markets and to maintain the current level of sales in its existing international markets is subject to risks associated with international operations. These include complying with a variety of foreign laws and regulations; unexpected changes in regulatory requirements; new tariffs or other barriers in some international markets; political instability and terrorist attacks; changes in diplomatic and trade relationships; and general economic fluctuations in specific countries, markets or currencies.
The economic conditions of the countries where MEXX operates affect the company’s operations and performance. Economic factors such as the continued weakening of economies, restricted credit markets and lower levels of consumer spending, can affect consumer confidence and consumer purchases of discretionary items, including fashion apparel and related products such as MEXX’s offerings. The economies of the countries where MEXX operates have weakened significantly as a result of the recent global economic crisis. The company’s results are dependent on a number of factors impacting consumer spending including but not limited to: general economic and business conditions in the United States, Europe and other parts of the world; consumer confidence; wages and current and expected employment levels; the housing market; consumer debt levels; availability of consumer credit; credit interest rates; fluctuations in foreign currency exchange rates; fuel and energy costs; energy shortages; the performance of the financial, equity and credit markets; taxes; general political conditions, both domestic and abroad; and the level of customer traffic within department stores, malls and other shopping and selling environments. Recent global economic conditions have included significant recessionary pressures and declines in employment levels, disposable income and actual and/or perceived wealth and further declines in consumer confidence and economic growth. These conditions have led and could lead to continued substantial decline in consumer spending over the foreseeable future and may have resulted in a resetting of consumer spending habits that makes it unlikely that spending will return to prior levels for the foreseeable future. The current depressed economic environment has been characterized by a dramatic decline in consumer discretionary spending and has disproportionately affected retailers and sellers of consumer goods, particularly those whose goods represent discretionary purchases, including fashion apparel and related products. A number of MEXX’s markets continue to suffer particularly severe downturns, including the company’s Eastern European markets, which have been particularly adversely affected by conditions in the world economy. Profitability of the MEXX business has been, and is expected to continue to be, even more affected by such downturn as such regions account for a significant amount of MEXX’s profitability. Fluctuations in the price, availability and quality of the fabrics or other raw materials used to manufacture MEXX’s products, as well as the price for labor, marketing and transportation, could have a material adverse effect on the cost of sales and the company’s ability to meet the demands of the customers. The prices for such fabrics depend largely on the market prices for the raw materials used to produced them.
The apparel and accessories industries have historically been subject to rapidly changing customer demands and tastes and fashion trends and to levels of discretionary spending, especially for fashion apparel and related products, which levels are currently weak. MEXX believes that its success is largely dependent on its ability to effectively anticipate, gauge, and respond to changing consumer demands and tastes across multiple product lines, shopping channels and geographies, in the design, pricing, styling and production of its products and in the merchandising and pricing of products in MEXX’s retail stores. The MEXX brand and products must appeal to a broad range of consumers whose preferences cannot be predicted with certainty and are subject to constant change. Also, the company must maintain and enhance favorable brand recognition, which may be affected by consumer attitudes towards the desirability of fashion products bearing a “mega brand” label and which are widely available at a broad range of retail stores. The company’s failure to gauge consumer needs and fashion trends and respond appropriately, and to appropriately forecast its ability to sell products, could adversely affect retail and consumer acceptance of its products and leave MEXX with substantial outstanding fabric and/or manufacturing commitments, resulting in increase in unsold inventory or missed opportunities.
We have in the past, and may, from time to time, acquire or develop new product lines, enter new markets or product categories, including through licensing arrangements (such as the license of our DANA BUCHMAN brand to Kohl's), and/or implement new business models (such as the licensing arrangements with JCPenney and QVC for the LIZ CLAIBORNE brands). Such activities are accompanied by a variety of risks inherent in any such new business venture, including the following:
• Our ability to identify appropriate business development opportunities, including new product lines and markets;
• New businesses, business models, product lines or market activities may require methods of operations, investments and marketing and financial strategies different from those employed in our other businesses, and may also involve buyers, store customers and/or competitors different from our historical buyers, store customers and competitors;
• Consumer acceptance of the new products or lines;
• We may not be able to generate projected or satisfactory levels of sales, profits and/or return on investment for a new business or product line, and may also encounter unanticipated events and unknown or uncertain liabilities that could materially impact our business;
• We may experience possible difficulties, delays and/or unanticipated costs in integrating the business, operations, personnel and/or systems of an acquired business and may also not be able to retain and appropriately motivate key personnel of an acquired business;
• We may not be able to maintain product licenses, which are subject to agreement with a variety of terms and conditions, or to enter into new licenses to enable us to launch new products and lines; and
• With respect to a business where we act as licensee, such as our licensed DKNY® JEANS, DKNY® ACTIVE and DKNY® MENS brands, there are a number of inherent risks, including, without limitation, compliance with terms set forth in the applicable license agreements, including among other things the maintenance of certain levels of sales and the public perception and/or acceptance of the licensor's brands or other product lines, which are not within our control.
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