Inca Designs Inc. (Pink Sheets: IDGI)

Dear Reader,

We know that for a variety of reasons that most of our readership is male. This mirrors the overall stock market investor demographic as well. And we know that a majority of this group have significant female others.  And we buy them purses, clothing, and more.

So, today’s profile on Inca Designs Inc. (Pink Sheets: IDGI) should hit home in a way that makes sense to those of us who purchase luxury goods to please the gals who call us husband, boyfriend, or daddy,

Inca Designs Inc. is a pocketbook play in more ways than one. The unique handbags offered by our subject company are the type of thing we purchase for the women we love. And unlike an array of ‘fashion’ plays that come and go in the small cap market, this company’s bags, swimwear and more are already marketed through 50 major U.S. retailers and 20-30 international retailers.

So, think about the money you’ve spent over the years on goods for your gals and take a look at the corporate profile below.
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About Inca Designs Inc.

Inca Designs Inc. (OTCPK:IDGI) designs, sources and sells high fashion designer swimwear, resort wear and accessories for the wholesale and retail markets under the brand names Inca, Incagirl, Incabag and Inca Junior. This  New York-based swimwear and resort wear designer markets its apparel through nearly 100 upscale department and specialty stores, including Barneys New York, Bergdorf Goodman, Saks Fifth Avenue and Neiman Marcus. Inca branded apparel is sold in South America, Europe, Asia, the Middle East and the Caribbean. 

The Inca brand was launched by fashion designer Stephanie Hirsch in 1996. During a trip to Peru and while traveling the Inca trails, Ms. Hirsch was inspired by the beauty of her surroundings to create a line of handbags that incorporated bright colors, intricate detailing and exotic textiles. The handbag line enjoyed immediate success and gained strong visibility when Hollywood celebrities such as Jennifer Aniston, Halle Berry and Salma Hayek became early customers. Ms. Hirsch expanded her business by adding luxury swimwear and resort wear inspired with exotic influences of Morocco, Mexico, Asia and Bali. Today, Inca Designs competes successfully with high-end designer brands such as  Masson and  Dolce & Gabbana and fashionable ready-to-wear lines such as Theory and Diane. Inca apparel has been featured in the world’s leading fashion magazines, including Vogue, Harper's Bazaar, Glamour, Allure, Lucky, Marie Claire, Cosmopolitan and Oprah, and in the Sports Illustrated swimsuit edition.

Inca Designs markets its apparel lines through approximately 50 major US retailers and 20-30 international retailers. In addition, the Company recently opened a flagship store on New York’s Upper East Side and will soon add a second retail store in Miami’s trendy South Beach area. The Company plans to establish a network of between four and ten retail stores by 2010. Inca has also expanded its apparel lines to include children’s and teen’s fashions and has also launched a line of home accessories. The Company has already booked approximately $500,000 in sales in early 2008 and we anticipate Inca will reach the $3 million milestone in annualized sales over the next 12 to 18 months.
 

The Apparel Market

Differentiated Apparel at Affordable Prices
The Company’s branded, high quality apparel retails at prices below other designer brands and competitive with contemporary high-fashion brands such as Theory, Diane and others. Because its prices are affordable, Inca apparel appeals to a broad cross-section of consumers. This in turn helps drive significant sales volume and solidifies brand loyalty across an economically and demographically diverse customer base.

Strong Media Coverage 
Advertisements in leading fashion magazines can cost hundreds of thousands of dollars per ad. Inca has been able to achieve the same level of visibility without spending a dime. The Company’s apparel has been featured in multi-page stories in Glamour, Cosmopolitan, Lucky, Elle, Town and Country, Travel & Leisure, the Sports Illustrated Swimsuit issue and numerous other national and international publications. Hollywood celebrities such as Kelly Ripa, Kate Hudson, Carmen Electra, Jennifer Aniston, Selma Hayek, Kathy Hilton, Hillary Swank and Vanessa Hudgens have been photographed wearing Inca apparel. In addition, the Company’s fashions have received TV exposure on MTV’s House of Style, E! Fashion File, Good Morning America and the Oprah Winfrey Show. 

Global Apparel, Accessories and Luxury Goods Market 
The global apparel, accessories and luxury goods market has grown 3.8% annually since 2002 to reach $1127.6 billion in 2006. This market includes clothing for men, women and children, jewelry, watches and leather goods. The women’s wear segment was the most lucrative in 2006, accounting for 42.9% of  industry revenues.

Market Stats The US retail apparel market generated sales of $295.5 billion in 2006 and accounted for 34.6% of global apparel sales. Women’s wear represented 58.3% of US apparel sales, followed by menswear (35%) and infantswear (6.8%).

Sales of women’s wear in the US grew 2.3% in 2006 (37.1% of global sales) to $172.2 billion. Sales of dresses, skirts and trousers contributed 45.4% of US women’s wear sales. 

Sales of swimwear and beachwear grew to $12.9 billion in 2006 and are forecast to reach $13.5 billion by 2012.  According to Just-Style research, women's swimwear as a percentage of the overall swimwear market will decline modestly from 70% in 2006 to 69% in 2012. Over the same period, children’s swimwear will grow from 13% to 14% of the overall market.  Inca markets apparel in both the children’s and women’s swimwear category. 

US swimwear is marketed across a growing number of industry distribution channels. Rapid improvements in technology have shortened the fashion  development timetable from years to months, particularly in the high-fashion and high-performance areas. Designers are also aggressively marketing their brands overseas to increase sales opportunities.

Growth in specialty apparel channels outpaces mass retail 
According to NPD, apparel sales through specialty stores and national chains are outperforming apparel sales through mass merchant channels. 

Growth in specialty apparel channels comes from unisex retailers (which grew 15% between 2004 and 2006) and children's and women's specialty retailers (up 7% from 2004).

Loyal customers drive upscale purchases
According to NDP, 33% of loyal retail customers account for  67% of  upscale retail store sales. The greatest increases in upscale loyalists were among consumers with household incomes exceeding $80,000 and in the 25-34 and 55+ age groups. An AccuPanel analysis of 50 upscale retailers, including leading department and specialty stores, indicated that loyal consumers who purchase more than 25% of their apparel from those retailers are increasing, despite a drop in the overall number of shoppers. Loyalists are more than twice as likely to shop in an upscale store and on average spend 50% more per shopping trip. These shoppers typically spend $95 per shopping trip, versus $61 per trip for the average retail shopper. 

Inca Design product lines
Inca Designs produces a wide variety of designer swimwear, resort wear and accessories sourced through strategic manufacturing partners in the US, India, China, and Southeast Asia. Inca’s “Resort Lifestyle Experience” concept caters to both the contemporary fashion and designer markets. 

Apparel lines 
Inca markets complete lines of swimwear, resort wear, handbags, shoes and accessories. The Company recently introduced its Inca Junior product line, which includes boy’s shirts, tunics, shorts and lounge pants, and its Inca Girl collection, which features designs for fashion-conscious teens and juniors. In addition, the Company recently launched a new line of home accessories, which includes luxury silk pillows, embroidered towels, table cloths and other items. In the future, Inca may introduce its own jewelry, footwear, intimate apparel, fashion accessories and furniture lines. 
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Marketing Strategy

A Diversified Approach
The Company employs innovative marketing techniques to promote its lifestyle apparel and plans to develop a network of Inca-branded retail stores, supported by high impact advertising, on-line sales, brand building and customer loyalty programs. 

Inca has gained invaluable free advertising through coverage of its apparel lines in leading national and international fashion magazines such as InStyle, Vogue, Town & Country, Glamour, Cosmopolitan, Lucky, Elle, Travel & Leisure, Oprah, Maxim and Esquire. 

It has also received immense visibility and brand-building assistance from Hollywood celebrities who have been photographed wearing Inca apparel such as  Carmen Electra, Jennifer Aniston and Denise Richards.

Inca works with nearly 100 upscale, global retailers who carry its high-fashion brand. These include Neiman Marcus, Barney’s New York, Bergdorf Goodman, Saks Fifth Avenue, Nordstrom, Henri Bendel, Fred Segal CA, Scoop New York, Jill Roberts, Everything But Water, Planet Blue, Victoria’s Secret and many others. The Company’s new Inca Junior apparel line is being showcased in its New York City store and its Inca Girls collection for girls ages 3 to 11 is available at Barney’s New York and 35 other retail stores nationwide. Barneys New York has been carrying Inca branded apparel for several years.

Retail Stores
In addition to sales through upscale retailers, Inca is establishing its own network of retail stores. The Company recently opened a flagship store in New York City at 71st and Lexington Avenue that offers high-end personalized services such as custom sizing and selection and personal shopping.  Another retail location will soon open in Miami’s trendy South Beach area and additional stores are planned for Atlanta, Los Angeles, Dubai, Macau, London, St. Tropez, Hawaii and Mexico. Inca plans to open between four and ten retail stores by 2010 along with a New York City showroom. 

New Product Lines
The Company also plans to launch new product lines (jewelry, intimate apparel, furniture, etc.) that will leverage its growing brand name and drive incremental sales. Co-branding events with the media and with wholesalers in the US and abroad will be explored as avenues for promoting brand visibility. The Company may also pursue select co-branding opportunities with athletic teams and motor sport racing teams. 

Leaders in the Fashion and Apparel Sector Include: 
VF Corporation (NYSE:VFC), Jones Apparel Group, Inc. (NYSE: JNY), AnnTaylor Stores Corporation (NYSE: ANN), Brown Shoe Company, Inc. (NYSE: BWS), Collective Brands (NYSE: PSS), Polo Ralph Lauren Corp. (NYSE: RL), and Liz Claiborne Inc. (NYSE: LIZ).
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Inca Management

Stephanie Hirsch, President and Secretary
Stephanie Hirsch, Inca Design’s President and Secretary, has worked in fashion and design throughout her entire business career. Ms. Hirsch founded Inca in 1996 and designs all of Inca’s apparel and accessory offerings. Her inspiration for the Company’s innovative designs came during a trip to Peru where she encountered exotic colors, fabric textures and details, which are incorporated into Inca designs and serve to differentiate the Inca brand. She is a graduate of Tulane University and was the recipient of the Fashion Group International Award for her accessory designs. 

Stacy Josloff, CEO and CFO
Stacy Josloff, the Company’s CEO and CFO, joined Inca in May 2005. Her responsibilities include business strategy, marketing, sales public relations, merchandising and finance. Prior to joining Inca, she spent 10 years as a high profile sales executive at Ralph Lauren and Max Mara USA. Since Ms. Josloff joined Inca, the Company’s gross sales have tripled. She was also instrumental in launching the new Inca Girl brand. Ms. Josloff graduated from the University of Michigan with a Bachelor of Fine Arts degree.
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Financial Highlights

The Company is a wholesaler and retailer of high-end swimsuits and resort wear  which appeals to fashion-conscious consumers. Its swimsuits typically retail for $150 to $300. According to New York research firm NDP Group, sales of two-piece swimsuits grew 20.5% in 2006, following 18.8% growth in the previous year. A $12.9 billion market in 2006, fashion swimwear is forecast to grow to a $13.5 billion market over the next few years. Women’s swimwear represents approximately 70% of the total market. Children’s swimwear is expected to account for approximately 14% of the market by 2012.
Flagship stores & new product lines accelerate revenue growth.

In October 2007, Inca Designs launched its new line of “Inca Junior” children’s apparel for boys consisting of lightweight shirts, tunics, shorts, and lounge pants. Inca Girl is a collection for girls ages 3 to 11.  The Company also introduced a new line of home accessories, which includes luxury silk pillows, embroidered towels, table cloths and other items. In the future, Inca may introduce its own jewelry, footwear, intimate apparel, fashion accessories and furniture lines.

In addition, Inca recently opened a flagship store on New York’s Upper East Side. A second store, located in Miami’s South Beach area  in the exclusive Gansevoort Hotel, will be opened soon.  Inca plans to open two more stores in key resort locations this year as well as in Atlanta, Las Angeles, Dubai, Macau, London, St. Tropez, Hawaii and Mexico. It expects to open between 4 and 10 new retail stores by 2010.

In addition to increasing its brand visibility through Inca-branded retail outlets, the Company enhances its profit potential since apparel sold in Inca stores will command a higher margin. Inca generates gross margins of around 70% on swimsuits sold through third-party retailers. 

Company Contacts

Inca Designs, Inc.
976 Lexington Ave.
New York, NY 10021

http://www.incagirl.com

Phone: 212-327-3007
Fax: 212-967-5218

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