WEEK IN REVIEW

Much better news is reported in this weeks ECONOMIC NEWS leading to a ray of optimism for the rest of 2010.

In our FOOTWEAR section week, positive earnings announcements were seen by some major players and while smaller than last year, business seemed to be rather good at last weeks WSA shoe in Las Vegas. The Chinese attack outlined this week against EU Tariffs is of great interest to all affected by it.

It was unfortunately novel to finally hear some good news from the UPHOLSTERY sector this week highlighted by the exclusive report from Lee Corson below. Even losses by one of the industries biggest players was less than had been the case previously.

This weeks GARMENT & ACCESSORIES also showed positive news, as one of the most high priced brands in the field was able to post sales gains. To some degree, this was an indirect cause of continuing firm prices in RAW MATERIALS again this week.

GENERAL NEWS

Indian Leather Exports up

Following a fall in growth of Indian leather exports in 2009, the Council for Leather Exports (CLE) said the market started to grow again from October 2009.

"Though exports increased towards the end of 2009 we expect the export turnover to reduce by 10% for 2009", said Habib Hussain, chairman, CLE. Despite the fall, the Indian leather industry should recover in 2010. An industry insider said India has been stealing market share from China and Turkey over the last few years.

Indian tanneries produce around 2 billion square feet of leather per annum (10% of the world total) with major tanning clusters in Chennai, Ambur, Ranipet, Kolkata, Kanpur and Jalandhar. India is home to 2091 tanneries (45% in Tamil Nadu, 26% in West Bengal and 18% in Uttar Pradesh

ECONOMIC NEWS

Retail sales up 3.6%

Including goods from food to clothing to gasoline - but excluding cars - U.S. retail sales rose 3.6% from January 2009, according to MasterCard Advisor's SpendingPulse, which offer an estimate of spending in all forms including cash. That increase followed a 4.8% gain in December and a 2.1% gain in November, according to SpendingPulse.

Excluding gas and auto sales, retail sales rose 0.3% in January, 2.1% in December and 0.2% in November compared with a year earlier. The year-over-year figures are not seasonally adjusted. SpendingPulse's month-to-month figures - which are seasonally adjusted and include gasoline but exclude autos - show January's sales rising 2.8% from December's, which fell 1.9% from November's. November's sales rose 1.1% from October.

Jobless rates improves to 9.7%

In its latest report on employment, the government said on Friday that American employers shed 20,000 nonfarm jobs in January and that job losses in 2009 were worse than previously reported. Though the government's survey of households found a drop in the unemployment rate, to 9.7%in January from 10% in December, the newfigures raised concern that the recovering economy may be slow to bring relief for workers.

U.S. Trade deficit jumps in December

The U.S. trade deficit surged to a larger-than-expected $40.18 billion in December, the biggest imbalance in 12 months. The wider deficit reflected a rebounding economy that is pushing up demand for imports.

The Commerce Department said the December deficit was 10.4 percent higher than the November imbalance. It was much larger than the $36 billion deficit that economists had expected.

For December, exports of goods and services rose for an eighth consecutive month, climbing 3.3 percent to $142.70 billion, reflecting strong gains in sales of commercial aircraft, industrial machinery and U.S. -made autos and auto parts.

Imports were up 4.8 percent in December to $182.88 billion, led by a 14.8 percent surge in oil imports, which rose to the highest level since October 2008.

For all of 2009, the deficit totaled $380.66 billion, the smallest imbalance in eight years, as a deep recession cut into imports. However, economists believe the deficit will rise in 2010 as U.S. demand for imports outpaces U.S. export sales.

The December deficit was the largest since the imbalance totaled $41.86 billion in December 2008. The deficit, which hit a nine-year low of $25.81 billion in May, has been rising in recent months as the U.S. economy has been pulling out of the deepest recession since the 1930s and demand for imports rebounds.

The deficit is expected to keep rising in 2010 even though U.S. manufacturers will be benefiting from stronger overseas sales as the global economy rebounds and a weaker dollar makes their products from competitive in foreign markets. The export gains are expected to be outpaced by an even larger rebound in imports.

Last year's decline in the value of the dollar against the euro, the joint currency of 16 European nations, and several other major currencies has helped make American goods more competitive on overseas markets. That will help lift the fortunes of America's beleaguered manufacturing sector.

Caterpillar Inc the world's largest maker of construction and mining equipment, said last month that it expected its sales will rise 10 percent to 25 percent this year. Caterpillar generates more than 60 percent of its sales overseas and it is forecasting strong growth to come from developing countries including China and India.

Dow Chemical Co., another major U.S. exporter, said that it expected continued improvement in its sales to emerging markets in Asia and Latin America but is less optimistic about markets in the United States and Europe due to expected continued high unemployment.

US productivity up

Employers are managing to boost production without creating new jobs. The question is when they'll feel the need to ramp up hiring.

Squeezing more output from their existing staffs allowed companies to boost productivity in the October-December quarter. And last week, the number of people filing new claims for jobless aid rose. The two Labor Department reports suggest that companies are still cutting costs and putting off hiring even as the economy recovers.

A separate report from the Commerce Department reinforced that manufacturing activity has become a pocket of strength in the economy. Orders to U.S. factories posted a big gain in December — rising 1 percent last month, double the forecast by economists surveyed by Thomson Reuters. The advance was the eighth in the past nine months. It was led by orders for metals such as steel and aluminum, as well as machinery.

Productivity rose by a seasonally adjusted 6.2 percent in the fourth quarter, above analysts' expectations of a 6 percent rise. It was the third straight quarter of sharp gains and indicated that companies are squeezing more output out of their work forces.

Productivity often increases at the end of recessions as companies ramp up output before hiring new workers. Rising productivity can raise living standards in the long run. But it can also make it easier for companies to put off new hiring.

The department also said labor costs fell 4.4 percent, the third decline in the past four quarters. Falling labor costs can boost company profits. Hourly compensation rose 1.5 percent, the department said. But labor costs fell because the rise in compensation was much less than the productivity increase.

Stocks sank as concerns about unemployment signaled to investors that the economic recovery will be sluggish. The Dow Jones industrial average fell about 190 points, or nearly 2 percent, in midmorning trading. Broader stock averages were down sharply, too.

The department's separate report on initial claims for jobless benefits said claims rose unexpectedly last week by 8,000 to 480,000. The rise in claims is the fourth in the past five weeks. It disappointed economists, who thought claims would resume a downward trend evident in the fall and early winter. The four-week average, which smooth’s fluctuations, rose for the third straight week to 468,750.

Productivity is up 5.1 percent in the past four quarters, the department said, the most since the 12 months ending with the first quarter of 2002.

In the long run, the good news for workers is that economists say the rise in productivity is unsustainable. They expect that companies will soon have to increase hiring to maintain production. What's not clear is when.

"You can push your workers but so far," said Anika Khan, an economist at Wells Fargo Securities. "At some point businesses have to begin to hire."

The economy will likely begin generating net job gains as early as March, Khan said. But they won't be enough to hold down the unemployment rate. Wells Fargo expects the rate to peak at 10.5 percent in the second half of this year, she said.

Output rose 7.2 percent, the department said, the largest increase since the third quarter of 2003. Hours worked rose 1 percent, the first increase since the second quarter of 2007. That's a hopeful sign that companies are cutting fewer jobs.

Initial jobless claims had dropped sharply in late December, raising hopes among economists that layoffs were nearing an end and the economy would soon start generating net gains in jobs.

Retail sales higher in January

Reuters reported this past week that January sales at top U.S. retailers moved into positive territory from last year's decline as many chains avoided drastic clearance sales and shoppers redeemed holiday gift cards.

Analysts on average had expected sales at stores open at least one year to rise 2.5 percent for the month, according to Thomson Reuters data, rebounding from a 5.7 percent drop in January 2009.

According to a preliminary tally of 21 retailers tracked by Thomson Reuters, 13 retailers beat estimates, while six came in below forecast. An additional nine chains were due to report.

The figures could mark the fifth consecutive monthly sales increase after a year's worth of declines during the recession, as consumers slowly return to spending and retailers lower prices to match a more circumspect shopper.

December same-store sales rose a stronger-than-expected 2.9 percent, helped by a late holiday shopping surge.

January is seen as the least important month of the holiday fourth quarter, accounting for the smallest portion of its sales. But with retailers avoiding the drastic clearance sales that hurt January sales a year ago and consumers cashing in on gift cards received in December, analysts expected some companies to raise their earnings forecasts.

Container traffic up on retail goods

SportsOne Media said this week that Import cargo volume at the nation's major retail container ports will be 25% higher during the first half of 2010 compared with the same period a year ago, according to the monthly Global Port Tracker report released today by the National Retail Federation and Hackett Associates.

"This is a dramatic turnaround over what we've seen during the past two years," NRF Vice-President for Supply Chain and Customs Policy Jonathan Gold said. "Increases in import volumes don't correspond directly with dollar volumes in sales, so caution has to be exercised when looking at these numbers. But retailers are clearly expecting to move more merchandise this year."

U.S. Ports handled 1.09 million Twenty-foot Equivalent Units in December, the latest month for which actual numbers are available. That was unchanged from November but up 2.6 percent from December 2008 to break a 28-month streak during which monthly totals were lower than the same month the year before. One TEU is one 20-foot cargo container or its equivalent.

January was estimated at 1.19 million TEU, a 17 percent increase over January 2009, and February, traditionally the slowest month of the year, is forecast at 1.1 million TEU, up 30 percent from the previous year. March is forecast at 1.18 million TEU, up 23 percent as retailers begin to stock up for spring and summer, April at 1.25 million TEU, up 27 percent, May at 1.3 million TEU, up 26 percent, and June at 1.38 million TEU, up 36 percent.

Those monthly numbers would put the first half of 2010 at 7.4 million TEU, up 25 percent from last year's 5.9 million TEU.With numbers from December now final, 2009 ended with a total volume of 12.7 million TEU, down 17 percent from 2008's 15.2 million TEU and the lowest since the 12.5 million TEU reported in 2003.

FOOTWEAR

WSA in Las Vegas

At the Las Vegas shoe show last week, several participants said that the event keeps getting smaller and smaller at each edition. The twice year event still had over 20,000 visitors. The organizers have not yet released what is sure to be their tale of success. However, observers noted that attendance along with the number of exhibitors appeared to be in the area of 20% less than the previous show. This is an ongoing trend for the Vegas show. Just several years ago, the event required venues at the Las Vegas and Sands Convention center and the then newly opened Mandalay Bay convention center. This year, it all fit into the Mandalay.

Another report at the show was heard of more and more synthetics being shown in women’s’ boots. Manufacturers have done an excellent job in copying leather with synthetics such as new buck and full grain footwear. Then there was the usual array of finished splits in all sorts of fashions as well. Exhibitors and retailers both said that boots continue to be one of the strongest individual categories

WSA said that buyers at the show were made up of 30% Specialty independent footwear retailers16% Boutiques (apparel with footwear) 16% Mass merchandisers/discounters 10% Specialty chain footwear retailers 8% Buying offices/other8% Department stores7% Mail order/catalog/ecommerce/company/factory outlet 5% Athletic/general sporting goods retailer

China goes to WTO over EU footwear tariffs

China filed a complaint against European Union shoe tariffs at the World Trade Organization as Beijing continued its legal assault on what it says is unfair Western protectionism. Europe has grown increasingly concerned about China's balance of trade and what some critics view as its artificially weak currency.

China, which joined the W.T.O. in 2001, filed its first unfair trade case against the European Union in July 2009, also involving antidumping duties. The latest move appeared intended to increase pressure on the European Union, which had itself been sharply divided over extending the shoe tariffs.

In a statement issued by its mission in Geneva, where the WTO is based, the Chinese government said Europe's actions "violated various obligations under the W.T.O and consequently caused damage to the legitimate rights and interests of Chinese exporters. "It added that China "had repeatedly consulted" with the European Union but said that its concerns "had not been properly addressed or settled."

In an eight-page legal complaint, the Chinese government requested consultations on both the original 2006 decision to impose the shoe duties and last year's move to extend them. The EU and the U.S. have sought to stem the flow of Chinese imports with special duties.

In the EU case, China is taking on one of the most important tariff increases ever levied, which has taken a bite out of its expansive shoe industry. The 16.5% tariffs are antidumping duties, meant to punish goods that are sold below cost and hurt the sales of domestic producers.

The EU duties were inaugurated in 2006 and extended for 15 months in December 2009. At the same time, shoe imports from Vietnam were hit with a 10% tariff. The duties "violate WTO rules and undermine the legitimate rights and interests of Chinese businesses," Commerce Ministry spokesman Yao Jian said, according to the Wall Street Journal.

The EU dismissed the complaint. "Antidumping duties are not about protectionism," said spokesman John Clancy. "They are about fighting unfair trade." The measures, he said, were imposed only on "evidence that dumping of Chinese products has taken place and that this is harming the otherwise competitive EU industry."

Baker’s Footwear sales comps up

Bakers Footwear Group, Inc. said net sales in January were unchanged at $11.9 million compared to the same period last year. Comparable store sales increased 0.8%, compared to an increase of 4.2% for the four-week period ended January 31, 2009.

For the thirteen-weeks ended January 30, 2010, the company's fourth fiscal quarter, net sales were $57.6 million, increasing 3.9% from $55.5 million for the thirteen-weeks ended January 31, 2009. Comparable store sales for the fourth quarter of fiscal 2009 increased 3.9%, compared to a comparable store sales increase of 3.6% for the fourth quarter of fiscal 2008.

For the fifty-two weeks ended January 30, 2010, the company's fiscal year 2009, net sales were $185.4 million, an increase of 0.9% from $183.7 million in the fifty-two weeks ended January 31, 2009. Comparable store sales for fiscal year 2009 increased 1.3%, compared to a comparable store sales increase of 0.5% for fiscal year 2008.

Adidas America restructures

Adidas America Inc. on Wednesday said it laid off a small number of employees as part of a U.S. restructuring at its Portland headquarters but indicated that it still expects to see job growth in the U.S. this year.

The company issued the following statement, "Today adidas America, Inc. announced a restructuring of its organization in support of the launch of a new US business plan. This action will result in a net increase to employee headcount at the company's Portland, Oregon headquarters.

The purpose of this restructuring is to simplify the business, increase efficiency, prioritize resources and position the company for long-term growth and opportunity. While the company is ultimately creating more jobs, many of the new positions demand a different skill set and experience level, thereby requiring the company to release some employees and recruit new talent. Although these decisions are very difficult, the company is making the strategic moves necessary in order to not only maintain but increase market position."

Adidas America spokeswoman Stephanie Von Allmen, speaking to Oregonlive.com, declined to divulge the specific number of job cuts, but said it would be fewer than the 60 jobs that will be added during the course of 2010. She said the company would release further details of the restructuring at a later date. The company employs 800 at its U.S. headquarters in North Portland.

Most of the jobs to be cut or relocated are in the company's sales and marketing operation, Von Allmen said.

Timberland earnings jump

The Timberland Company reported fourth-quarter earnings vaulted 69.4% to $22.3 million, from $13.1 million, or 23 cents, a year ago. Revenue eased 0.7% to $387.8 million from $390.6 million a year ago and were down 3.9% on a constant dollar basis, reflecting declines in the boots business partially offset by strong growth in the SmartWool brand and performance footwear.

Foreign exchange rate changes increased fourth-quarter 2009 revenue by approximately $12.3 million due to the weakening of the U.S. dollar relative to the Euro, Japanese Yen, and British Pound.

North America revenue decreased 6.5% to $215.7 million compared to the prior year period, due to a decline in the boots business partially offset by growth in Timberland® brand apparel, SmartWool® apparel and accessories, and men's performance footwear.

Europe revenue increased 17.1% to $128.4 million versus 2008 fourth-quarter levels, and increased 8.3% on a constant dollar basis. European results reflect benefits from foreign exchange, continued strength in the boots business, growth in all categories of women's footwear, and the net addition of 9 retail stores since the fourth quarter of 2008. Asia revenue decreased 13.4% to $43.6 million compared to the prior year period, and decreased 17.6% on a constant dollar basis, driven by declines in boots, casual footwear, apparel, and the net closure of 8 retail stores since the fourth quarter of 2008.

Global footwear revenue decreased 2.8% to $273.4 million from the fourth quarter of 2008, as declines in the boots business in North America and Asia offset growth in the European boots business.

Worldwide consumer direct revenue increased 3.7% to $138.2 million from the fourth quarter of 2008, driven by an improvement in apparel and casual footwear, partially offset by a decline in boots. Global wholesale revenue was down 3.0% to $249.5 million compared to the prior year period, primarily due to a decline in the kids' boots business and Timberland® apparel.

Jeffrey B. Swartz, Timberland's President and Chief Executive Officer, stated, "In 2009 we saw solid results in our classic boot business in Europe, substantial growth in our SmartWool brand and significant improvement during the fourth quarter in the performance footwear category, all indicative of Timberland's strength as an authentic outdoor brand. During these difficult economic times we have worked hard to continue making great product, build our relationship with consumers around the world and maintain a strong balance sheet, all of which we believe leave us well-positioned to capture the long-term potential of the Timberland brand."

Brazil and Argentina

Governments of Brazil and Argentina reached a consensus February 3 to strengthen cooperation on import commodities anti-dumping survey and exchange investigation results.

According to the agreement signed by Argentina's Ministry of Industry and Tourism and Brazil's Ministry of Industry and Foreign Trade Development Bureau of Trade Protection, information sharing mechanism will be established for strengthening coordination on conducting of anti-dumping investigation.

As per the agreement each side launching anti-dumping investigation on certain imported product should inform other side related departments of latest progress and results.As result Brazil and Argentina are ready jointly to launch an anti-dumping duty investigation into Chinese shoes.

As important trade partner for each other the trade protection measures taken by both sides had led an increase in trade disputes and adecline in trade value since the end of 2008. For boosting bilateral trade Argentina governmentjoining with Brazil take As important trade partners the trade protection measures taken by both sides led increase in trade disputes and decline in trade value since the end of 2008. For boosting bilateral trade Argentina government joining with Brazil take proactive action on anti-dumping investigation against imported products. The bilateral trade ministerial meeting will be hosted in Buenos Aires on February 4. The trade issues will be discussed on this meeting that could bethe first such meeting to be held this year.

Shoe makers expands in China

The Aokang Group president Wang Zhentao announced in Chongqing city they plan to increase 100 million yuan investment to build second phase project of shoemaking materials market in Bishan city, where is named as western shoe capital in China.

Wang Zhentao said as EU antidumping duty on Chinese shoe we can’t expect EU market surging in short period of time, therefore we determine to increase our investment in domestic market andstart the second phase project construction in Western Shoe Capital of China.

He added the first phase project has already completed that attracted over 480 shoemaking materials traders opening stores here, the market expansion program is expected to cost 100 million yuan and will put into use in 2012. At that time the trading value in the market is estimated to reach 4 billion yuan.

Brazilian footwear consumption

The total consumption of footwear in Brazil was 630 million pairs in 2009. Out of this total, 600 million pairs were supplied by the Brazilian industry and 30 million were imported. The footwear sales in the Brazilian market grew 8% in 2009, and the retail already forecasts an increase of 10% in 2010.

In 2009 the Brazilian footwear industry produced 725 million pairs. 125 million pairs were exported to over 140 countries, with an invoicing of US$ 1.3 billion in 2009. Foreign sales dropped 28% during the last year, because of the world economic crisis and the strong valorization of the Real vis-ŕ-vis the US Dollar.

Brazil boasts the most complete footwear cluster in the world.

In the country there are approximately 1,500 large, medium and small size footwear industries and more than 5,000 micro-companies and ateliers.

Brazil also boasts the world's largest commercial cattle herd. The country has 800 tanneries that produced 43 million hides in 2009 and exported US$ 1.1 billion, with a 38% drop compared to 2008.

The footwear chain also features 2 thousand industries of components for leather and footwear, and of industries that produce machineries and equipment.

The footwear chain in Brazil generates around 1 million direct and indirect jobs: 400 thousand in the footwear industry; 400 thousand in the footwear retail; and the rest is divided among tanneries, industries of components, and industries that produce machineries and equipment.

Brazil has been manufacturing footwear for over 100 years and exports since the 70’s In addition to the large clusters of Vale dos Sinos (Rio Grande do Sul) and Franca (Săo Paulo), the leather-footwear chain is present today in over 20 States of Brazil.

UPHOLSTERY

Our leather furniture correspondent Lee Corson filed this report after attending WORLD MARKET in Las Vegas last week.

The Las Vegas Furniture Market ended its five-day run yesterday with a generally upbeat review from exhibitors and buyers alike. Attendees were greeted by strong values, many new introductions and refreshingly positive comments about improving business conditions, which have not been heard for a prolonged period of time.

New leather introductions were plentiful and covered a broad cross section of price points and styling.  As could be expected, the opening leather price points were well represented with bonded leather products, bonded leather match combinations as well as bycast and bycast match products.  The mid and upper end price points continue to focus on top grain leathers.  There was also a continued and increasing use of mixed leather and fabric combinations that enabled sellers to more easily differentiate their product from those using leather overall on their products.  All price point displayed an increased diversity of using colors other than basic brown industry standard.

The huge migration of domestic leather upholstery manufacturing to China has by necessity, required American manufacturers and distributors alike to develop domestic warehousing programs offering quick ship programs in order to adequately service their customers.  That evolution combined with the prolonged industry slump has made domestic warehousing of products absolutely mandatory if one is to perform competitively.  It also enables retailers to maximize their sales without materially adding to their inventory, which is a win-win for the retailers.

While there are no single styling direction that is currently dominating the industry's merchandising direction, there is surely a trend towards broader use of transitional styling straddling the traditional and contemporary venues.  This trend influences the type and colors of hides used and presently tend to lighter tones than previously used in the past.

The leather upholstery category continues to be a dominant factor in the residential furniture business with no signs of a flattening or decline in demand for the foreseeable future.

Other news from the show was many retailers saying that they think it will take heavy promotion (what else is new) to drive traffic but they expect more biz in10 than 9 which was the depths of bad

High Point forecasts better business

This year should be a better for home furnishings retailers as the ground for economic recovery continues to be laid, according to the High Point Market Authority's just-released Spring 2010 Business Outlook.

The report draws on recent economic data and consultations with retailers. It also details strategies that retailers are using to position themselves for growth and lessons learned in the last 18 months.

It includes statistics on consumer interest in purchasing home furnishings this year and outlines indicators of a growing economy. It also discusses how the effects of unemployment continue to weigh heavily on economic growth.

"Reports from retailers across the country and industry experts from a variety of fields, as well as year-end numbers from 2009, suggest that we are back on the road to recovery," said Brian Casey, president and CEO of the Market Authority.

"While none of the leading retailers we interviewed sugarcoated their experiences over the past year by any means, we found their responses to be thoughtful and upbeat."

The report contains insights from officials with the National Home Furnishings Assn., Nell Hill's, Wolf Furniture, La Difference and Raymour & Flanigan, among others.

Furniture Brands reduces loss

Furniture Brands International reduced its fourth-quarter net loss to $64.98 million as sales fell 29.2%.

The net loss, which equals $1.35 per share, was well below the loss recorded in the final quarter of 2008, when an asset impairment charge of more than $200 million led to a loss of $353.8 million.

This year's fourth-quarter sales totaled $285.6 million, down from $403.4 million in the fourth quarter of 2008.

Ralph Scozzafava, chairman and CEO, said the results "show the effect of the recession on consumer spending."

"The company's results also reflect decision to right-size the company and reduce our cost basis," he added. "These actions are good for our business in the long term."

Scozzafava said the company's balance sheet remains strong, and will be bolstered further with the receipt of a federal tax refund of $58 million to $60 million during the first half of this year. The refund stems from passage of the Worker, Home Ownership and Business Assistance Act on Nov. 9, which changed tax laws regarding operating losses for businesses.

Furniture Brands ended the year with $83.9 million in cash and $78 million in long-term debt.

For all of 2009, the company had a net loss of $108.7 million, or $2.25 per share. That compares with a loss of $385.9 million, or $7.92 per share, in 2008.

Sales in 2009 totaled $1.22 billion, down 29.8% from $1.74 billion in 2008.

"Our order trends appear to be stabilizing and the company's upholstery business is tracking with industry patterns, especially in the medium price points," Scozzafava said. "Sales in our higher-end brands continue to reflect a cautious attitude on the part of the luxury consumer."

GARMENTS AND ACCESSORIES

Luxury brands showing improvement

Stores received a pleasant surprise in January as shoppers bought a little more clothing at mall stores, delivering solid gains for many retailers and providing more hope that a spending recovery that started late last year is being sustained.

Still, the sales reports, released Thursday, showed two kinds of consumers — ordinary folks who are buying a little more but still focused on bargains, and the affluent who are spending more freely on Gucci and other luxury brands as they feel encouraged by their rebounding stock portfolios.

Fourth-quarter profits look brighter, too, as Macy's and Bon-Ton Stores are raising their outlooks because they didn't have to discount heavily and saw sales improve.

Luxury chains such as Nordstrom Inc. and Saks Inc. also had strong sales gains that well surpassed Wall Street expectations.

J.C. Penney Co., Stage Stores Inc. and teen retailer Wet Seal suffered declines. Target Corp. and Costco, excluding gasoline sales, had only modest gains.

"Retailers are breathing another sigh of relief," said Ken Perkins, president of RetailMetrics, a research firm. "There are more winners than losers." But he emphasized many shoppers were still tight with their purse springs.

"The vast majority are still very focused on value and stretching every dollar. And that's not going to change for most of the year."

Michael P. Niemira, chief economist at the International Council of Shopping Centers, agreed, noting that consumers are "tiptoeing back though they haven't dramatically changed their shopping patterns."

The ICSC reported that January sales were up 3 percent compared with January 2009, following a 3.6 percent rise in December. The January figure is well above ICSC's forecast for a 1 percent gain. In January 2009, sales dropped 4.6 percent.

The numbers are based on sales at stores opened at least a year and are considered a key indicator of a retailer's health because it excludes the effects of new stores. The figures exclude Wal-Mart Stores Inc., the world's largest retailer which stopped reporting its sales on a monthly basis last year.

Many mall clothing stores including Limited Brands, Gap Inc. and Macy's announced solid sales increases. Even Abercrombie & Fitch, which had seen its teen customers, defect to less expensive alternatives, saw a surprising sales increase, its first since April 2008.

Mall-based apparel stores enjoyed a 6.4 percent sales gain for January, the best performance since March 2007 when that segment had a 7 percent increase, according to the ICSC. However, January's figures are being compared with a 14 percent drop a year ago.

January's strength came despite poor weather and limited racks of holiday clearance items. January is the least important month of the year on retailers' calendar as stores use the period to clear out winter merchandise and bring in spring merchandise. For the holiday season, stores ordered so conservatively that they ended December with relatively little extra inventory — and less than usual to mark down in January.

Hermes posts large gains

Hermes scored an 8.5 percent increase in 2009 turnover, making it one of the few European luxury houses to grow sales in the year just finished.  Paris-based Hermes announced Friday that 2009 turnover had risen to 1.914 billion euros, or $2.625 billion, thanks to solid retail growth throughout the year.

By way of comparison, earlier this week LVMH, the world’s biggest luxury group, announced that group sales had slid by one percent, while Hong Kong-based retailer Esprit announced a 3 percent fall in sales for the second half of 2009. Generally speaking, most major fashion and luxury companies suffered single figure sale declines in the tricky trading conditions of 2009.

Hermes only provided sales figures in its release, but predicted that its net income “should be slightly up compared with 2008,” when complete financial results will be reported on 25 March 2010.

Hermes added that “growth accelerated in the fourth quarter,” especially at the Christmas holidays, when robust trading drove up sales in the Group's stores up by 18 percent. In the most recent three-month period, sales expanded by a robust 20 percent in the Americas, by 12 percent in Asia and by 9 percent in Europe.

In the Americas, “the fourth-quarter rebound in retail business pushed up annual sales by 7 percent,” Hermes stressed in the release. Business was also helped by three new branches in the United States, one in Canada and a first location in Brazil, a concession in Sao Paulo.

However, in Japan, “a consistently lackluster business climate,” dragged sales down 11 percent over the year. Elsewhere in Asia, sales surged 29 percent last year, driven by China, Macau and Hong Kong, with six new branches opened in the region.

Business was best for Hermes in its own retail network, with directly owned boutiques scoring a 17 percent rise in business through the year. However, acting in the opposite direction, wholesale revenues plummeted by 17 percent as distributors drew down their inventories.

The luxury brand noted that it “rapidly expanded its distribution network,” adding 14 new branches and renovating or expanding nine other locations. In Europe, Hermes opened two new branches, including a first store in Turkey, in Istanbul.

The house’s best performer by sector was Leather Goods & Saddlery, up 16 percent to 936 million euros, $1,284 billion, driven by heavy demand for leather bags. The company’s weakest performing major sector was Perfumes, where sales slid 6 percent to just 117 million euros, or $160 million, due to ”distributor inventory draw-downs over the first nine months.”

In 2010, Hermes will push ahead with expansion plans, opening twelve new branches, including a new store on rue de Sevres in Paris and a second branch on Madison Avenue in New York.

Tandy Leather Factory posts gain

Tandy Leather Factory Inc. reported its sales for the month of January were $4.5 million, up 3 percent compared with January 2009 sales.

Retail Leathercraft’s sales rose 8 percent to $2.3 million compared with January 2009 sales of $2.1 million and the 74 comparable stores’ sales were up 7 percent for the month compared with the same period last year.

The retailer opened one store in 2009, which added $16,000 to the company’s January sales.

Wholesale Leathercraft posted sales of $2.1 million for January, up 1 percent over January 2009 sales of $2.1 million. Within the Wholesale Leathercraft division, the wholesale stores’ sales were up 5 percent for the month while the national account group posted a January sales decline of 19 percent.

International Leathercraft, which consists of one store in the United Kingdom, reported January sales of $112,000, an 8 percent increase from sales of $104,000 in January 2009. The UK store opened in February 2008 as a combination retail and wholesale store.

“The positive sales trends continue in our wholesale and retail stores as we begin 2010,” said CEO and President Jon Thompson in a release. “I am especially pleased with the wholesale stores as they have now had three consecutive months of sales gains. The January sales gains are back to the level of 2006 before the economy started slowing down. Our UK store will be two years old in February and continues to generate consistent sales gains, which confirms my belief of the potential that exists beyond our borders if we can find the right people to manage stores.”

RAW MATERIALS

US

Wet blue heavy Texas steers, selected for top grain were offered at $105/pc c&f. On an fob basis, wet blue full substance native cows were offered at $57.00 and Holstein cows at $64.00. Buyers idea’s were several dollars lower as interested waned with the onset of Lunar holiday’s in the Far East

Brazil

Wet blue, whole hides, machine flayed, full substance, average 48/52 ft, average 24 kg

Selection TR1 at around $ 1.20/ft CFR and it’s said that even more in some cases as it was reported some small sales at levels of $1.25. But there is a gap between what really happens and the asking prices. The current asking price for TR1 has gone above $ 1.30 now.

Selection TR2 at around $ 1.10/ft CFR.

In sides, we can say that prices are about these:

	substance 2.4/+ mm
selection B	$ 1.30
selection C	$ 1.20
selection D	$ 1.00
selection E	$ 0.85

The crust leather for upholstery, in substance 0.9/1.1 mm, in sizes varying from 48 to 56 ft:

$ 1.15/ft CFR for selection TR1

$ 1.05/ft CFR for selection TR2

The automotive upholstery leather, in substances 1.1/1.3 to 1.2/1.4 mm, stucco and buffed, at:

$ 1.25-1.30/ft CFR for selection TR1

$ 1.15-1.20/ft CFR for selection TR2

Argentina

The crust leather for automotive upholstery, in substance 1.1/1.3 to 1.2/1.4 mm, has been sold at levels like:

$ 1.35/ft CFR for material that can either be stucco and buffed for the most requiring customers, but usually sold for full grain type of leather.

And at $ 1.15-1.20/ft CFR for a medium grade, stucco and buffed.

For upholstery crust leather, we can find prices from $ 1.05 up to 1.40/ft CFR, depending on selection, grain, region, substance, etc.

For shoes, in substance 1.2/1.4 mm, natural/not dyed, prices have been:

TR1 - $ 2.00/ft CFR

TR2 - $ 1.60

TR3 - $ 1.30

LOOKING AHEAD

Show time continues with many majors ahead. In Europe alone the following exhibitions are beginning in the weeks ahead.

Le Cuir	Paris, France	Feb. 9-12
Styl & Kabo	Brno, Czech Republic	Feb. 14-18
Shoe, Leather	Kiev	Feb. 17-20
Moda Footwear	Birmingham, UK	Feb. 21-23
MICAM-Mipel	Milan	Mar. 2-5
Iberpiel/Modacalzado	Madrid, Spain	Mar. 11-13
GDS	Düsseldorf, Germany	Mar. 12-14
Lineapelle	Bologna, Italy	Mar. 16-18

The Far East has already begun to close for Lunar New Years holiday’s that will slow down the entire world industry for the next week or two.

Leather Table

Shoe Upper Leather	This Week	Last Week
Full Grain aniline, cowhide 2.0 mm and down	2.30-2.35	2.30-2.35
Full Grain aniline, cowhide 2.0/2.4 mm	2.30-2.35	2.30-2.35
Full Grain aniline, cowhide 2.4 mm and up	2.30-2.35	2.30-2.35
Corrected leather, cowhide 2.0 mm and down	1.55-1.65	1.55-1.65
Corrected leather, cowhide 2.0/2.4 mm	1.55-1.65	1.55-1.65
Corrected leather, cowhide 2.4 mm and up	1.55-1.65	1.55-1.65
Upholstery Leather	This Week	Last Week
Full Grain aniline, cowhide 1.0/1.4 mm	2.65	2.65
Full Grain aniline, cowhide 1.4 mm and up	3.05	3.05
Corrected leather, cowhide 1.0/1.4 mm	2.45	2.45
Corrected leather, cowhide 1.4 mm and up	2.86	2.86
Split Leather	This Week	Last Week
Embossed, smooth 1.4/1.6 mm	.75-.80	.75-.80
Embossed haircell 1.4/1.6 mm	.75-.80	.75-.80