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Trough to peak apparel margins more than doubled from 6% in 2Q01 to 13.2% in 3Q06. Impressive run indeed – almost as impressive as the six-point collapse to 7.1% over the ensuing 7 quarters.

When I objectively look at the chart below, I have to ask myself whether the industry has officially round-tripped it, and margins have bottomed. As much as I want to believe this to be true, I can’t bring myself to believe that the late 1990s serve as an appropriate proxy for what real margins in this industry should be. My long standing math suggests that after adding the $3-$5bn in annual sourcing savings as well as the favorable impact of the weakening dollar, real margins were actually down over the past 4 years.

We still have not seen a) the full impact of the raw material cost hit that will happen starting in holiday, b) FX benefit that will turn the other way and eat into the supply chain’s margin kitty, and c) the additional names likely to be added to the bankruptcy honor roll.

I truly think we’re getting to the bottom for some names, but the industry still needs a healthy session of blood-letting. On top of all that, expectations still call for up margins in ’09. Not gonna happen…Favorites remain KSWS, LIZ, RL, FL, TBL, PSS and ZQK. I don’t like GES, WRC, SKX, GIL, DKS, PVH, and VFC.