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From March 2008
“Luxury shoppers have a more direct
relationship to the stock market than other
consumers, and the gyrations they’re
experiencing are worrisome,” Niemira says.
“Worry is not good for the psychology of
spending.” In other words, luxury shoppers can
still afford to spend $400 for a handbag, but
they’re feeling “less wealthy”
— and many don’t feel good about spending
knowing that their neighbor is struggling to pay
the mortgage.
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C. Britt Beemer, chairman of America’s Research
Group, agrees that luxury shoppers’ spending is
emotionally linked to the stock market. “There
are a lot of affluent people that have 401(k)s
tied to stock market performance, but
well-heeled consumers have 60 to 70 percent of
their wealth linked to stocks, he says. Even if
they don’t have any intentions of taking money
out of the market in the near future, seeing big
losses on paper has a negative effect on
spending.”
Caution reigns
Luxury retailers remain cautiously optimistic
about the upcoming spring season and the
remainder of 2008. It’s clear, however, that the
double-digit sales growth to which many had
become accustomed is likely out of reach. Still,
if they can keep inventories in check, resist
the urge to append promotions and ride the wave
of foreign shoppers flocking to stateside
stores, they’re betting same-store sales will
grow — even if by smaller margins.
A silver lining will be international business.
Several retailers will open new stores outside
the United States, and they are hopeful that
global sales will give corporate balance sheets
a much needed shot in the arm.
Last month, Tiffany outlined plans for a high
single-digit increase in U.S. retail sales for
2008, and a mid-teens gain in international
retail sales for the same period. “Generally
speaking, we are planning our U.S. businesses
cautiously for the first half of 2008,” says CEO
Michael Kowalski, “while planning for continued
healthy international sales growth throughout
the year.” |
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Coach CEO Lew Frankfort acknowledges that some
of the brand’s customers traded down to
lower-priced items during the final weeks of
2007, noting that the company was “not immune to
a slowing consumer environment.” Still, a bright
spot for Coach was a 13 percent increase in
sales of their $400-plus handbags.
“It’s the middle class that is being hit,”
Frankfort said during a call with investors.
“The truly upper-income consumer does not seem
to be affected.” He told investors that in light
of “continued uncertainty,” Coach would not
provide comparable-store sales guidance for the
balance of the fiscal year. Still, he
underscored the brand’s commitment to
innovation.
“This challenging climate has only served to
reinforce our long-standing practice of
evolution and continuous improvement,” Frankfort
said.
Similarly, it’s business as usual at
Dallas-based Neiman Marcus. “We have experience
with this,” CEO Burton Tansky told investors on
a recent call. “We’ve gone through it before.
This customer does not trade down, she does not
change venues . . . she does not leave us. What
she does, if in fact this continues to be
challenging . . . she’ll buy a little less.”
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