Luxury retailers may be in for a cold winter.
After witnessing a decline in sales at the tail end of the summer, luxury brands like Saks, Nordstrom and Tiffany & Co. are bracing for what could be an even weaker holiday season. Local high-end retailers and other business operators say business is holding steady.
Those three retail oldtimers plus Neiman Marcus and Macy’s have all reported declines in same-store sales in recent months. Nordstrom reported a 5.9% decline in August and a $32 million loss for its fiscal quarter which ended August 2. Neiman Marcus reported a $35.7 million loss for the same quarter and a 1.4% decline in same-store sales. Tiffany & Co. reported a 4% decline in same-store sales.
Some local luxury retailers seem to be bucking the trend. Escape Massage, an upscale massage parlor clinic in Short Pump, has done “very well despite the economic conditions,” according to manager Mike Vines.
“The month of August was our best month ever for sales,” Vines said.
A manager at a high-end clothing retailer who asked that her name not be used because of corporate restrictions said that sales for this summer are “pretty much in line” with sales from last summer. She also said that she doesn’t expect a large decrease in sales in the coming months.
And a manager in a similar position at a different luxury retailer said that he doesn’t see any reason to panic yet. His store has seen minimal increases and decreases in sales from this year to last.
At Escape Massage, Vines said that he is taking a wait-and-see approach with the upcoming holiday season, as he remains unsure of exactly how the company will be affected by the country’s financial situation.
“It’s hard to gauge. We saw some slow-down early in the summer when the gas prices shot up, but it didn’t affect us all that much. Things may slow down a little more,” Vines said.
So while local shops are working to avoid the holiday blues, nationally, luxury retailers are preparing for the worst, although some of the stable local companies are having a rough time of it, too. Nobody seems to know how much longer Circuit City will be around, while former employees at Wachovia may have just seen a significant part of their retirement or compensation wiped out when the stock tanked on Monday. It has since rebounded somewhat.
And as BizSense reported yesterday, companies are hiring fewer staffers this winter in anticipation of a weak market. Similar cost-cutting measures, such as changes to orders for spring 2009, are also in the works as retailers attempt to keep their heads above water in a volatile business climate.
The recent financial crisis is largely to blame. James Skinner, Neiman’s chief financial officer, told the Wall Street Journal that consumers are cutting back amid fears about the economy.
Skinner said that round-the-clock coverage of the turmoil is negatively affecting the mood of shoppers, who in most cases, can still afford the same luxury goods that they were spending on last year.
But emotion isn’t the only factor at work here. The country’s financial woes are forcing consumers from all walks of life to tighten the purse strings and cut back on excess spending.
Luxury retailers have already been hurt by an influx of budget-conscious buyers and bargain seekers. In many cases, these consumers are turning to cut-rate discounters like Wal-Mart and TJ Maxx.
But with the recent troubles on Wall Street, luxury brands may face even more problems, not the least of which is the health of their flagship stores in New York.
Many luxury brands rely heavily on their flagship store earnings. Tiffany generates about one-tenth of its total sales from its Fifth Avenue location in New York. Saks generates about one-fifth of its total sales from its New York flagship. Coach, Nordstrom, and Polo Ralph Lauren also rely heavily on their New York-based stores.
Some stores are doing well. Hermes International saw a 24% gain in U.S. sales in the first two quarters of the 2008 fiscal year compared to last year. Bottega Veneta also reported double-digit percent growth in the second fiscal quarter. Coach saw sales rise 21% from last year to this year. Juicy Couture, which recently introduced a high-end line called Couture Couture, saw a 48% increase in sales for the first half of 2008. And Gucci reported an increase in overall sales of 11% in the second quarter of 2008 compared to the previous year.
Earlier in the summer, BizSense reported on the health of local malls Short Pump Town Center and Stony Point Fashion Park had the lowest empty-store rates. They are both home to several upscale retailers, including Nordstrom, Saks, Anthropologie, Banana Republic, Brookstone, Louis Vuitton, Macy’s, Hugo Boss and Williams-Sonoma.