Skip navigation
Retail Traffic


Luxury is back in style

After a two-year drought, sales of designer brands at upscale stores are outpacing those of their cheaper counterparts. In September, Neiman Marcus registered a 13.6 percent increase and Gucci a 10 percent increase in comp-store sales from 2002, while Credit Suisse First Boston's mall anchor index rose just 3.1 percent.

“The U.S. luxury goods market is recovering,” says Christian Oddone of the Actinvest Group in London. Much of the growth is in accessories, particularly purses and jewelry, though apparel sales are up as well.

Bill Taubman, executive vice president of Taubman Centers, says the company's tony tenants registered sales increases in the double digits. Taubman recently opened Stony Point Fashion Park in Richmond, Va., bringing that market its first Louis Vuitton and Saks Fifth Avenue stores, which have seen a lot of traffic.

The upbeat news has been a long time coming. The national mourning period that followed 9/11 made ostentatious buys seem like a frivolous act of self-absorption. Then the SARs epidemic hurt tourism. Finally, the standoff and eventual war with Iraq cast a further pall over high-priced designer purchases. Consumers apparently think the worst is over and are spending again for the real deal.

And it's not only the rich who are buying. Many shoppers, who wouldn't have spent hundreds of dollars for a purse in the past, are willing to shell out that much to have one to-die-for accessory, rather than several lower priced, lower quality and less impressive products. What's more, the selection has never been so large. Many designers have overhauled their product lines. Bear Stearns analyst Dana Telsey says she is impressed by what she calls the “high level of newness” among luxury retailers.

Expansions on Track

What this means for developers is that the top-of-the-line retailers are proceeding with expansion plans that were a bit iffy when the news was bad, and they are planning even more openings and expansions of existing stores.

Coach, for example, whose profit soared 88 percent in the latest quarter to $42.3 million, will add 20 new U.S. locations and 10 Japanese locations a year for the near term, with a goal of 350 full-price stores eventually vs. about 162 now. It also plans to expand eight U.S. retail locations.

Tiffany indicated it would continue with its plans to open more stores, including its Temple St. Clair boutiques and a 5,300-square-foot store at Florida's The Gardens of the Palm Beaches.

Expansion by European firms had stalled, but is now increasing with the turnaround and waning fears about travel and the weakness of the dollar against the euro. The weak dollar lets foreign retailers lease space and build new stores at a discount, even though they have to mark up the price of their goods to maintain profitability. Once the dollar rebounds, they should be in a good position to profit from the expansion, says Taubman.

New York broker Faith Hope Consolo says she's seeing increased demand for New York real estate by European designers. Among the firms actively looking for sites are units of Gucci and LVMH; its Fendi brand is spending heavily to reposition itself for the future. LVMH will open a big new Louis Vuitton store at Fifth Avenue and 57th Street in Manhattan in February.

“The real question,” asks one analyst, “is can this upturn be sustained?” Taubman says luxury goods makers can only expand so much before the exclusiveness of the brand diminishes. And not all high-fashion firms are doing well. For example, Saks Fifth Avenue Chief Executive Christina Johnson resigned her post in late October after the chain consistently placed second to competitor Neiman Marcus because, analysts said, Saks had inferior merchandising.

Why the rebound now? Taubman suggests a cultural shift has increased emphasis on fashion and design among consumers, who are no longer shopping just for the mundane basics. Maybe that's why the Louis Vuitton store at Americana Mall in Manhasset, N.Y., still has thousands of women on the waiting list for the French label's colorful line of Takashi Murakami-designed handbags.

TAGS: Retail
Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.