NEW YORK | Tue Aug 17, 2010 2:51pm EDT

NEW YORK (Reuters) - Saks Inc posted better-than-expected quarterly results on Tuesday, helped by an uptick in luxury spending and selling fewer items at a discount, sending its shares up more than 3 percent.

Saks said sales at stores open at least one year, or same-store sales, rose 4.6 percent, with its flagship department store on Manhattan’s Fifth Avenue performing well.

Across the Saks Fifth Avenue chain, shoppers sought shoes, handbags, women’s designer apparel and men’s tailored clothing, among other categories.

However, Chief Executive Stephen Sadove cautioned that the U.S. economy is fragile and that the company would continue to be conservative in how it manages inventory.

“We believe that economic recovery will be slow and fragile with potential periods of increased volatility,” Sadove said on a call with analysts.

Saks reported a second-quarter net loss of $32.2 million, or 21 cents per share, compared with a loss of $54.5 million, or 39 cents a share, a year earlier.

Excluding one-time items, Saks reported a loss of 13 cents per share. On average, analysts expected a loss of 17 cents per share, according to Thomson Reuters I/B/E/S.

Sales rose 5.1 percent to $593.1 million, ahead of the $585.2 million that analysts expected.

Gross margins rose 7 percentage points from a year earlier to 37.3 percent as tighter inventories reduced the need for price markdowns.

FEWER STORES, HIGHER MARGINS

Saks sees same-store sales rising in the “mid-single digit” percentage range for the remainder of its fiscal year, outpacing a “low-to-mid single digit” increase in same-store inventory levels.

It forecast improved gross margin rates, saying they would hit 39 percent in the second half of its fiscal year.

Saks has been vigilant in managing its inventory to avoid a repeat of the deep discounts it offered in late 2008 to clear merchandise during the financial crisis.

“It’s wise to drain inventories right now a little bit because the third quarter is going to be very soft,” said Milton Pedraza, chief executive of the Luxury Institute, a consulting firm. “That promotes price and margin stability.”

Similarly, off-price retailer TJX Cos Inc , which operates T.J. Maxx and Marshalls, said inventory was down 13 percent during the quarter. CEO Carol Meyrowitz said the company will further reduce markdowns.

A number of major department store chains such as Macy’s Inc, Nordstrom Inc  and Kohl’s Corp have enjoyed strong same-store sales increases in recent months, putting pressure on off-price channels and outlet stores.

Saks, which operates 50 Saks Fifth Avenue stores and 55 OFF 5th outlets, said same-store sales growth at its outlets during the quarter was lower than the companywide average, though those outlets were up against tougher numbers to beat.

Saks has also been shutting underperforming stores. On Tuesday, the company said it was closing Saks Fifth Avenue stores in Plano, Texas and Mission Viejo, California, bringing to five the number of closings so far this year.

Sadove said that it might close a few more Fifth Avenue stores. The company plans to open a handful of its lower-priced OFF 5th outlets annually in the next few years.

Saks shares were up 26 cents, or 3.4 percent to $7.87 in afternoon trading, while TJX shares were up 86 cents, or 2.1 percent, to $42.23.

http://www.reuters.com/article/globalMarketsNews/idUSTRE67G26Q20100817

It once was thought that online social networking was the exclusive digital playground of kids and job hunters. But increasingly social networking is proving to be one of the most powerful channels to deliver personalised marketing messages directly to luxury consumers.

As a travel professional, you know that you need to engage your clients wherever they are located. And right now they are flocking to online social networking websites. Are you feeling a bit intimidated by social networking? Don’t be! You can easily embrace the channel to elevate relationships with your clients and market luxury travel to a select audience.

There are more than 120 million active users of Facebook in the USA alone. Luxury brands such as Gucci, Louis Vuitton and Tiffany & Co have tens of thousands to hundreds of thousands of devoted “friends” on this channel. Even on Twitter, approximately 20 percent of “tweets” mention a brand somewhere in their text.

Still think your clients are not engaged in online social networking? In a recent survey conducted by the Luxury Institute, 72 percent of consumers with an average household income of $415,000 said they belong to a social networking site, with Facebook and Twitter ranking among the top three fastest growing sites. There also is plenty of room in this realm for you to start a conversation about up-market and prestige brands with a potential client.

So why is social networking so “hot”? Like other media, social networking helps you tell a story. But what differentiates this new channel is that it helps tell the story in real time as it unfolds. The immediacy of social networking channels makes you the “insider” and the “go-to” expert.” They also help you efficiently communicate with a large number of clients simultaneously.

Social networking also gets your audience, and your clients, involved. It invites them to engage in a discussion with you and your other clients in a forum that you’ve created, helping you to build and enhance your client relationships on a whole new level.

Through the proliferation of smartphones with social networking capabilities, such as iPhones and Blackberries, your clients can now receive and respond to your Facebook and Twitter updates wherever they are, whenever they want. Up to 30 million active Facebook users access the service through a mobile device. Now you’re doing mobile marketing!

Many of these social networking websites are very user-friendly and do not require technical expertise, so almost anyone can do it. All you need to do is sign up and start posting. Be sure to invite all of your clients to “like” your Facebook page and “follow” your Twitter feeds. If you have a blog, add a button that allows visitors to join your social network with just one click. And while you’re doing that, be sure to “retweet” your Facebook update and post your tweets on your Facebook page. In this way, you can connect with people in the various communications channels that you own.

Keep things fresh with regular updates, but stay on topic. Creating a store of interesting discussion topics can be very simple. Ask your friends and followers what their opinions are on a luxury travel news item that you saw during your morning headline searches, or briefly recount a memorable luxury travel experience that you can deliver again. Someone may ask you to tell them more, and that someone may become a new client.

Social networking sites also are great channels to gather intelligence about what your clients are thinking about certain topics. Spark a conversation by asking a question like what port city offers the best fine dining. Or survey your friends and followers to see what they think will be the top exotic region to visit next season.

Of course, timely responses to your Facebook friends and Twitter followers are critical to your social networking success. In the luxury sector, you know that service is a prerequisite. Responding to feedback from your Facebook friends and Twitter followers is an extension of that high-touch service. This, in turn, represents an opportunity for you to create a new relationship or foster an established one.

Though the internet is not a new space, engaging luxury travel clients through social networking is a new way of doing business. Luxury brands are flourishing through social networking and luxury consumers are paying attention - perhaps even more than the average consumer. Are you the one who can help them find an enriching experience in their search for information through social networking? In the end, if you don’t engage your clients in the places where they are, someone else most certainly will.

http://www.marketingweb.co.za/marketingweb/view/marketingweb/en/page71621?oid=129078&sn=Marketingweb%20detail&pid=71616

Do the habits of the ultrawealthy point to the future of m-commerce?

The best mobile commerce user experience comes from downloading shopping apps on a smartphone. Though growth in smartphone sales is increasing and the devices are spreading through the population, smartphone owners still tend to be more affluent than average.

And affluents may be taking the lead in shopping and buying via mobile. According to a spring 2010 survey by PriceGrabber.com, 13% of all US web-enabled mobile users reported purchasing online. That was up from 10% in 2009. InsightExpress found predictably lower usage among all mobile users, at 5% in Q2 2010.

Based on a report from The Luxury Institute, affluent and ultra-affluent mobile users are more likely to make purchases from their mobile devices. One in five respondents with incomes of at least $150,000 said they did so at least rarely, and among users with net worth of at least $5 million m-commerce was even more popular.

Movie and event tickets, along with technology and personal electronics, were the most popular items purchased via mobile by affluents, similar to the general population. But ultra-affluents were more likely to also use their phones to buy high-ticket items like designer bags and shoes, jewelry and automotive products.

Affluents also differed from the general population when asked about the barriers to further mobile commerce usage. Most were not worried about security problems or mobile web hassles, but simply felt no need to shop via mobile.

The types of activities the wealthy used their mobile phones for while shopping were similar to those of the general population. As in the InsightExpress survey of all mobile users, respondents to The Luxury Institute poll were most likely to have used their phone to call and talk to someone about an item. Sending a text or picture message was also popular in both surveys.

Looking up product information was also common, with a view to comparing prices, getting product descriptions, looking for deals and checking store information. These are typical mobile shopping behaviors of all mobile users. Ultra-affluents were less interested in some activities, like price comparison.

While wealthy shoppers have a few unusual habits, like purchasing luxury products on the go, many are simply using the same mobile tools as the general population with greater frequency and fewer concerns.

http://www.emarketer.com/Article.aspx?R=1007859

NEW YORK — About a decade ago, Bob Gannicott, a prospector and geologist by trade, walked in the doors of Harry Winston Inc.’s flagship salon on Manhattan’s Fifth Avenue and made a rare and unexpected discovery: The iconic diamond business known as the “jeweller to the stars” was for sale.

Mr. Gannicott was only hoping to work out a partnership with the ultra-luxury diamond retailer to help glean better price information for the hundreds of millions of dollars worth of rough diamonds his firm, Canada-based Aber Diamond Corp., was about to start hauling from a mine in an Arctic lake 300 kilometres north of Yellowknife.

But with cash set to roll in from the mine - one of the richest diamond finds in the world - the idea of owning the upper-crust jeweller outright was starting to make sense, Mr. Gannicott said.

He was coming to realize, after a previous pact with Tiffany & Co. failed to pan out, that the only way a rough diamond marketer like his company was going to secure price information on finished diamonds would be to own a retailer outright.

An acrimonious two-decade family feud between two brothers - Ron and Bruce Winston, who were heirs to the company’s eponymous founder - had made some sort of sale or investment a necessity.

The deal took a few years to crystallize but by 2004, Aber had closed on an acquisition for a 51% stake in Harry Winston for US$85-million. In 2006, the diamond maverick bought the remaining 49% for US$157-million.

The strategy has paid off in part: Aber, which in 2007 renamed itself Harry Winston Diamond Corp., has transformed itself from a junior prospector into a high-end diamond marketer that fetches some of the richest rough diamond prices in world.

Things haven’t gone so smoothly on the retail end, however.

Some investors and analysts complain that the Harry Winston retail business - which made its name as red-carpet staple for Hollywood A-listers like Gwyneth Paltrow, Madonna and Halle Berry - has done nothing but lose money, dragging down the mining company’s overall bottom line.

While some are hoping the company will cut its losses and spin off the retail business, Mr. Gannicott defended the unlikely acquisition, saying it is performing as expected and would have turned in a robust profit in 2009 were it not for the financial crisis that gripped the world in 2008.

“We never intended to draw earnings out of this early on,” Mr. Gannicott, the 63-year-old chairman and chief executive of Harry Winston Diamond Corp., told the Financial Post. “We could have just said we’ll leave it at five stores, spend a bit of money on marketing and let it throw off a few million a year…. The idea was to grow it into an international business that, in time, would be worth significantly more value and generate significant earnings.”

Mr. Gannicott, who got his start in the business as a miner when he left his native England for Yellowknife at the age of 19, said the Harry Winston business seemed barely touched since the late 1970s, when the company’s namesake founder died. “The company became like a Sleeping Beauty castle. It’s a good thing nothing silly was done with it, like a perfume line.”

Expanding the retail business is not unlike mining, he added. “When you spend money on exploration, it comes straight off your bottom line. What we’re focused on at Harry Winston is not to take profits now, but to grow it in a sound manner.”

When Aber first took a stake in Harry Winston, the jeweller had six salons: two in the United States, two in Europe and two in Japan. Under its new ownership, it expanded to 19 salons, with six new U.S. locations and three more in Japan, as well as four locations in other parts of Asia - a region that’s expected to see a surge in demand in the coming years.

The company plans to nearly double its store count by 2016 to 35.

To revive its stagnant product lines and marketing efforts, Mr. Gannicott in January hired Frederic de Narp, who headed rival luxury jeweller Cartier’s North American division, as the new chief executive of its retail business.

Mr. de Narp proposed a five-year plan for his new boss that puts the business on a path toward turning an annual profit of 10% through the introduction of new products, jewellery collections, brighter lines and additional watches lines.

“The world has come out of a dark place in the last two years,” the Brittany native told Harry Winston investors at the company’s annual meeting at Toronto’s Fairmont Royal York Hotel in June. “And the market conditions today are right for Harry Winston.”

With only an estimated 15% of the US$150-billion in global jewellery sales spent on branded jewellery, the opportunity for Harry Winston, one of the most prestigious names in the business, is huge, he said.

Mr. de Narp also noted that while demand for jewellery and high-end watches is increasing, local jewellers are being forced to close their doors because of the financial crisis. “Where do they go if those local jewellers close every day? They will go to Harry Winston,” he said.

In a move that will help fund its retail expansion, Harry Winston announced last week that it’s buying back a stake in its rich Diavik diamond mine that it was forced to sell in March 2009 to avoid going under amid the financial crisis.

The purchase from Kinross Gold Corp. - which made the Toronto-based gold producer a handsome profit - will restore Harry Winston’s 40% stake in the mine and give its cash flow a nice boost.

Harry Winston owns the development - Canada’s largest diamond mine - with international mining behemoth Rio Tinto.

Part of the draw for investing in retail is that the mine is a depleting asset and could be exhausted in 12 years, while the retail business can keep expanding as world demand grows.

Trying to strike it rich with another mine would be a huge gamble. Mr. Gannicott noted that since 1870, in the history of diamond exploration, 5,000 kimberlites - the volcanic rock best known for carrying diamonds - have been discovered, 850 of which contain diamonds, and only 50 of which were economically viable to mine.

In sharp contrast, the gold industry discovered 1,025 viable mines in the same period.

Still, Mr. Gannicott isn’t ruling out hitting on another mining development.

One potential target, according to some industry analysts, is Toronto-based Mountain Provinces Diamond Inc. It’s main asset is a 44% stake in Gahcho Kue, one of Canada’s largest diamond deposits and the largest diamond mine under development around the world.

“We talk all of the time, but it’s a question of value,” said Mr. Gannicott. “Its share price is already substantial.”

Investing in retail gives the company a chance to participate in the two most lucrative ends of the business: selling rough diamonds and finished jewellery.

Mr. Gannicott originally thought its Diavik diamonds could be sold directly to its Harry Winston salons and made into fine jewellery in the Fifth Avenue townhouse that is home to its flagship store.

But the Canadian government frowns on such transactions, preferring instead that the rough diamonds be sold on the open market to ensure it gets the maximum tax windfall. “They prefer arms-length sales,” said Mr. Gannicott.

Some analysts and investors would prefer the company give up on retail and focus on the part of the diamond business that’s given it the most success and the highest profits.

“If the retail part contributed zero you could ignore that and focus on the mine part of the business, but the fact is, historically, it’s been a negative contributor to earnings,” said John Hughes, a Toronto-based analyst with Desjardins Securities Inc. “It’s taken away from what the mine has done.”

Mr. Hughes had a “buy” rating on Harry Winston’s stock, but downgraded it to “sell” a few months ago after the shares zoomed above $10.

The stock’s had a huge run since, sinking to a low of $2.62 last year before Kinross came to the rescue and took a stake in the company.

It ended regular trading on the Toronto Stock Exchange on Friday at $12.74 a share.

“It’s an expensive stock by all measures unless you assume there’s a sustained turnaround in the retail business,” said Mr. Hughes. “I’m not willing to ask my clients to take that risk, given the history of consistent operating losses. I don’t think there are any quick fixes for the retail business.”

John Kaiser, an independent analyst and editor of the Kaiser Bottom-Fishing Report, said that owning the Harry Winston salons will give the company a longer life beyond when the Diavik mine is depleted. But he’d also like to see the company invest in another mine, such as the Gahcho Kue. “It’s a natural,” he said.

Mr. Kaiser said he advised his readers to buy the stock after Kinross took a stake in the company and he’s now mulling whether to remove that recommendation now that the shares have had such a spectacular run-up.

While Wall Street might be skeptical of the Canadian miner’s retail ambitions, others see strong upside for the brand, which was almost frozen in time as the Winston brothers squabbled over their fortune.

Milton Pedraza, chief executive of the Luxury Institute, a research firm that follows the industry, said that long-term prospects for the Harry Winston brand are very good, based on his surveys of the super rich with individual net worth of US$5-million or more.

“I can say, ‘My dear darling, I just bought you a diamond from 47th Street,’ ” a district in midtown Manhattan well known for its row of diamond wholesalers, Mr. Pedraza said. “Or I can say it came from Harry Winston or Cartier. That will have far higher value psychologically, even if it has the same carats.”

http://www.financialpost.com/news/Mining+glitter/3343862/story.html

Earlier Fashion’s Collective introduced the importance of luxury brands cultivating a personal approach as a means of engaging customers (Cultivating a Personal Touch ). Now more than ever taking that personal approach with customers is a major focus for the luxury sector to garner sales.

Previously luxury brands only gave special attention to customers who proved themselves worthy through their spending habits with the brand. However today the tables have turned, customers seek more personal approaches as a means to justify paying premium prices, if a brand does not acknowledge them from the start it fails at capturing lifetime customers.

For instance a customer can spend $2,000 on the first purchase, he also has the propensity to come back three times a year to spend that same amount over the next four years, bringing the net value of $24,000. However such propensities need to be cultivated through positive experiences and relationships between the customer and the brand.

According to Milton Pedraza, the CEO of New York based Luxury Institute who specializes in consulting CRM initiatives for brands,”Luxury brands have become too transactional as opposed to relationship focused. Even if someone buys a simple necktie, there needs to be a level of consumer acknowledgement. This is the essence of clientelling, the foundation of building long lasting relationships between the brand and their customers”.

Rather than just acknowledging the customer who spends heavily on a first time purchase, luxury retailers are aligning to pay attention to lower tier customers. By building up a relationship with smaller spenders over time builds their customer spend and customer lifetime value to the brand as a whole.

As consumers evaluate their spending habits, Clienteling or otherwise known as Client Relationship Management (CRM) has become a major focus ever since the recession hit luxury retailers. Clienteling is the essence of a brand taking the time to get to know their customer, continuing the conversation after purchase, remembering special occasions and over all offering a bespoke customer service.

As brands aim to cast a wider customer net with clienteling inatiives we at Fashion’s Collective are seeing a few savvy luxury brands extending clienteling inatives into the web experience.

Over the next couple of weeks we will be sharing how certain brands and companies are innovating within the CRM space.

http://fashionscollective.com/FashionAndLuxury/07/love-thy-customer-the-importance-of-client-relationship-management/

EVERYONE needs a place to live, but no one needs a second home. So choosing which vacation home to buy and where should be enjoyable. Still, people routinely buy second homes that end up being less than they expected, or worse.

I speak from experience here. My wife and I own a condominium in Naples, Fla. One of our neighbors is as bad as neighbors come. In Florida real estate parlance, he is a “condo commando” - a busybody who questions other residents on what they are doing and then routinely complains to the condo’s board about them.

Bad neighbors abound everywhere, but they seem particularly bothersome when they are in places where you go to relax. Shouldn’t everyone just be grateful to be sitting in the sun or at fireside near the ski slopes?

The dynamics of second homeownership often conspire against this, said Milton F. Pedraza, chief executive of the Luxury Institute, an organization that does research on wealthy consumers. “People become slaves to their homes. They buy into the headlines and that makes them pretty miserable with their vacation homes.”

Mr. Pedraza said one common cause of second-home misery was that owners failed to factor in how much time and money were needed to maintain a place from hundreds, if not thousands, of miles away.

My colleague Ron Lieber recently wrote about answering the tough financial questions that children ask their parents. That made me think that adults buying second homes should ask equally tough questions - of themselves. Why, after all, do you want a second home? What are you going to use it for? Do you have any idea how much it is really going to cost?

While many parts of the country are still struggling with falling home prices, a survey from the National Association of Realtors said sales of second homes were up 7.9 percent last year, compared with a 7.1 percent increase for primary residences. And this is the time of year when people begin to look for the winter rentals that often turn into second homes.

Before you jump in, here’s a look at what you should know before buying a second home.

IT’S NOT AN INVESTMENT If the recession taught people anything, it is that the value of a home can go down. Vacation properties are certainly not immune.

Beyond the ups and downs of the real estate market, Mr. Pedraza said most buyers underestimated the maintenance costs of a second home.

“Think of the 20 to 25 suppliers who come to your house for air-conditioning, heating, landscaping, the pool man, the plumber - now you’ve got to procure those same suppliers for another property,” he said. “If you have the money and it doesn’t mean anything to you from an investment point of view and you can hire the staff, then fine.”

Deb Howard, a realtor in Lake Tahoe and chairwoman of the National Association of Realtors’ resort and second home committee, said many people looked at the properties as a place for the family to gather and as something to leave to the children. But they still need to consider the carrying costs of the property.

Ms. Howard says her first question to buyers is always what kind of lifestyle they expect to have. But her second is whether they need to rent the home to cover the costs. “Sometimes it’s not the right decision,” Ms. Howard said. “You’re not going to use it enough. Or it’s not going to meet your financial goals.”

IT’S LESS RELAXING What persuades people to buy a second home is usually a vacation. A second home, they think, will keep the party going with the added benefit of having a place of their own.

“They only see the benefits - sitting by the pool, having a piña colada, driving into the driveway and leaving the Rolls Royce there,” Mr. Pedraza said. “They never figure the gate is going to be broken and they will need an electrician.” (You will also be making your own piña coladas and cleaning out the blender.)

Enthusiasm for a place can also lead to a hasty purchase. Barry Peele, of Sotheby’s International Realty in Beverly Hills, said a client recently bought a waterfront home in Miami only to find out after the closing that the dock would not accommodate his yacht. Suddenly, the convenience of walking out to his boat - the original attraction - was gone.

And then there is the pressure to use the place. “People have high expectations of their usage,” said Brian Sharples, chief executive of HomeAway, which runs several vacation rental Web sites. “The industry average is 30 days of use per year.”

For full article see:

http://www.nytimes.com/2010/07/24/business/24wealth.html or A version of this article appeared in print on July 24, 2010, on page B6 of the New York edition.

“Luxury retail in general took the hardest hit during this recession,” Katz recently commented. “Our customers pulled back dramatically from spending… that being said, we are very happy to see that business is coming back. The customer is definitely back in the stores.”

Katz, who will take over as CEO of Neiman Marcus in October, hopes she has a recovery ahead of her. The company’s sales did indeed see an uptick in revenue for the first half of the year, but Neiman Marcus was forced to do something out of character: use discounting to prompt sales.

That’s always a risk for an upscale retailer, but Katz “remains confident the brand was protected as Neiman’s kept its focus on exclusive merchandise.”

Milton Pedraza, CEO of The Luxury Institute, believes Neiman’s discounting had “some short-term impact on the brand’s reputation for exclusivity,” but, he adds, “I think the brand clearly survived.”

With customers drifting away from luxury brands and stores in 2008 and 2009, Neiman Marcus and other luxury retailers were forced into territory that is typically occupied by its down-market competitors.

Saks, another luxury retailer, tried everything from store discounting to online sales and, in the first half of the year, implemented a new ad campaign designed to get customers to “think about” the value of their brand.

Saks Fifth Avenue has struggled but it, too, has seen modest increases so far in 2010. Saks CEO Steve Sadove, like Katz, is hopeful the worst is over, but he isn’t being bullish on the recovery just yet.

“We’ll continue to be cautious, Sadove told CNBC. “I think you’ll see a little bit more ‘opportunity buying’ in certain categories, like the shoes, like the handbags. I would say inventories will be growing a little bit less than consumption, but we’ll still continue to be cautious.”

For her part, Neiman’s Katz is looking at a future that includes more than just in-store selling.

“I believe that the intersection of traditional retailing, e-commerce retailing and social networking… all of that is going to come together in a very different way than we can see it today,” says Katz. “We are just starting to understand how powerful that intersection can be, so we’ll see where it evolves to.”

http://www.brandchannel.com/home/post/2010/07/16/Luxury-Retailers-Eager-for-Change.aspx

By Arlene Satchell, Sun Sentinel, July 19, 2010

On this trip, Guzzi bought a $100 Lily dress for $46, while Picarello snagged a $300 pair of Gucci glasses for $149.

Luxury sales matter because increased spending at these retail stores are a boost to the local economy and job creation. South Florida’s concentration of wealth means it supports more luxury retail than many other parts of the country.

A recent Gallup poll found self-reported spending by upper-income Americans rose roughly 16 percent to an average of $126 a day for the week ending June 20, up from $109 a day when surveyed the same week a year earlier.

By contrast, middle- and lower-income Americans spent an average of $59 a day that week, which was unchanged from last year, the survey noted.

At Nordstrom, year-over-year sales were up 14 percent in the five weeks ending July 3, in stores that had been open a year or more.

“Overall, we’re encouraged,” said Nordstrom spokesman Colin Johnson. “But we’re mindful of the fact that customers remain cautious and are mindful of how and where they shop.”

While some luxury retailers have fared better this year, experts say growth is tepid given last year’s dismal sales.

In the first quarter of 2009, luxury retailers Saks, Nordstrom and others had double-digit monthly sales declines - as high as 31 percent for some.

“The real test will be if luxury [spending] can show growth as we enter into the early fall period,” said Marshal Cohen, chief industry analyst with the NDP Group, a market research firm in New York.

A significant rebound in the segment is unlikely until the national unemployment rate falls to 6 percent or 7 percent, said Milton Pedraza, chief executive of the Luxury Institute in New York. Unemployment was 9.5 percent in June. That’s when so-called “aspirationals” - middle-class shoppers with an affinity for luxury goods - are likely to return.

To combat the recession’s lingering effects and attract affluent buyers who have turned frugal, some retailers have had to reduce prices.

“There’s a lot more affordability in the luxury sector today,” Pedraza said. A pair of shoes or handbag that cost $1,200 two years ago is now selling for $800 or $900, he said.

Luxury retailers have reduced the number of apparel brands they carry to the most popular, newest and most innovative, said Cynthia Cohen, president of Miami-based Strategic Mindshare, a national retail consulting firm.

“Anything that’s not selling, they’re getting rid of,” she said.

Another result of luxury retailers’ adapting to the marketplace is more off-price and clearance outlet stores.

Nordstrom, for example is opening more Nordstrom Rack stores, which sells its goods at a 50 percent to 60 percent discount.

Bloomingdale’s also plans four outlet stores this year, signaling its foray into the luxury discount market. Two of the outlet stores will be in South Florida.

Experts say it’s an effort to capture business from stores like Macy’s and Dillard’s.

“It’s an attempt to go down market, without saying so,” Pedraza said.

http://www.sun-sentinel.com/business/fl-luxury-retail-rebound-20100719,0,1245303.story

Dallas Business Journal
Kerri Panchuk Staff Writer

 ”I still don’t think we are back to the place we enjoyed in 2008,” said Rod McGeachy, president and CEO of fashion accessory firm Tandy Brands Accessories Inc. (Nasdaq: TBAC). “But I do think the numbers are getting better than what they were in 2009.”

McGeachy added that retailers and companies like his, which profit from product orders from other retailers, are seeing “pent up demand.”

That recovery - although welcomed - is mostly statistical, he said. The increase in same-store sales “it’s not a real recovery just yet,” McGeachy said.

Rising tide

Real or statistical, the recovery is a welcomed change from 2009, when luxury retailer Neiman Marcus, for example, saw its April same-store sales drop 22.5 percent from the same period a year earlier. The retailer saw same-store sales grow 10.9 percent, hitting $301 million in the past month, up from $271 million a year earlier.

“I think it’s just that a rising tide lifts all boats,” said Milton Pedraza, CEO of retail analyst The Luxury Institute LLC in New York. “I think consumers last year went to the extreme in saving. Now, after the fourth quarter, they are starting to spend a little bit more. They were tired of being frugal.”

Pedraza said a bottoming out in the housing market, a stock market that seems to be maintaining its own and a general feeling that the economy is no longer bleeding jobs is fostering more consumer confidence.

Ted Vaughn, a partner at BDO Seidman LLP, said because companies like Neiman’s experienced significant drops in prior year sales, 2010 sales may look more dramatic on paper. Even so, Vaughn and other retail experts don’t doubt the pendulum is swinging in a more positive direction.

Not every retailer can credit the economy for a rise in April same-store sales.

Fort Worth-based leather goods and accessories retailer Tandy Leather Factory saw monthly same-store sales grow 11 percent, hitting $4.9 million, up from $4.4 million a year earlier.

“A lot of our sales growth (in April 2010) resulted from changes that we made,” said Jon Thompson, CEO of Tandy Leather Factory. “We changed the way we send inventory to our stores and handled our items.”

Thompson said the company focused more on maintaining a strategic sales mix while pushing aggressively for Tandy Leather stores to stock shelves with best sellers.

“We noticed a lot of stores were not ordering items that we thought they should have in stock,” Thompson said.

Once the corporate office focused on inventory selection, sales improvements took root.

Thompson said Tandy Leather tends to run contrary to market conditions.

When the market is down, Tandy Leather generally performs better than other retail outlets, he said. He said in tough economic times shoppers come to Tandy Leather stores to buy materials to make dog collars and other custom-made leather items.

These items, he said, are generally popular among consumers who are buying leather for the purpose of making other goods for them to sell in a distressed economy.

In the past, “when we’ve gone into a down market, we have seen this same type of customer come back to us,” Thompson said.
Confident consumers

Despite improved demand, Plano-based J.C. Penney saw same-store comparables fall 3.3 percent in April. That was less than the 6.6 drop between the same periods in 2009 and 2008.

Earlier this year, J.C. Penney began feeling the lift of strengthening consumer confidence as same-store sales jumped 5.4 percent for March. J.C. Penney was not available to comment on what factors pushed sales higher in the first part of the year. The retailer’s March sales reflected strong performances in the children’s apparel and apparel segments, according to J.C. Penney sales reports.

But perhaps the biggest rebound in same-store sales happened at Neiman’s.

During the downturn Neiman’s “took the brunt of it” with wealthy shoppers curbing their discretionary income, Pedraza said.

Pedraza added that while high-end shoppers are the first to leave, they are also the first to come back.

But until retailers get to the fourth quarter, most are remaining cautious. There is momentum, Pedraza said, but he calls it “a tepid positive momentum.”

Incoming Neiman Marcus CEO Karen Katz says she is committed to building a consistent pattern in sales and merchandising - two staples of the Neiman Marcus brand. For the moment, that’s about all she is saying.

Katz is quietly plotting her course and spending the summer conducting research leading up to her Oct. 7 start date.

A three-decade veteran in the retail industry, Katz spent 25 years at Neiman’s before being named CEO in late spring.

“We have this amazing culture at Neiman Marcus,” Katz, who is currently executive vice president of Neiman Marcus Group said. “We still operate the business on the founding principles of merchandise excellence and high levels of customer service … Those things will not change, but the way you do those things could very well change as we move forward.”

Milton Pedraza, CEO of The Luxury Institute in New York, believes change is needed at Neiman’s.

Neiman Marcus saw its sales rebound in the first part of the year, but Pedraza says double-digit sales gains in the first part of 2010 subsided with the company reporting only single-digit sale increases in the most recent period.

Many analysts had expressed concern about how the high-end retailer would weather a storm that sent all shoppers - including those at the luxury end of the spectrum - running. In response, retailers like Neiman’s rolled out some discounting that had not previously been part of their sales plans.

Katz admits 2009 was a rough year.

“Luxury retail in general took the hardest hit during this recession,” she said. “Our customers pulled back dramatically from spending, so I think some of the nice increases we’ve seen these last number of months are because a year ago we were in the depths of the depression.”

She added “that being said, we are very happy to see that business is coming back. The customer is definitely back in the stores.”

Katz remains confident the brand was protected as Neiman’s kept its focus on exclusive merchandise while trying to make sales in 2009.

Pedraza says some of the discounting he saw at Neiman’s did have some short-term impact on the brand’s reputation for exclusivity, but he believes the Neiman Marcus brand remains intact overall.

“I think the brand clearly survived,” he said, “but it needs to reinvent itself in terms of the customer’s experience.”

Brian Sozzi, retail analyst with Wall Street Strategies, said Neiman’s wasn’t alone in efforts to create price points needed to make up for anemic sales. He agrees Neiman’s brand remains strong.

“I don’t think they are overexpanding along the lines of other retailers,” he said. “I don’t think they have as unfavorable a debt position as Saks.”

He does, however, see room for improvement.

“I think Neiman’s probably stands above Saks,” he said, while adding that the company may be below Nordstrom in terms of the upscale industry’s standard for customer experience.

Katz recognizes that change is inevitable, noting that e-commerce and online technology have changed the face of retail. She said those factors will continue to reshape how shoppers buy and retailers sell. While she remains coy about what the future holds, she hints that online will be an integral part.

“I believe that the intersection of traditional retailing, e-commerce retailing and social networking … all of that is going to come together in a very different way than we can see it today,” she said. “We are just starting to understand how powerful that intersection can be, so we’ll see where it evolves to.”

Pedraza said Neiman’s actually hit the online platform as one of the first to meet early expectations on the e-commerce side, but said other high-end retailers, such as Nordstrom, eventually pushed the online standard a bit higher. He, too, sees online as a major component of future retail, and one Neiman’s cannot ignore.