It Will Take Time Before Luxury Consumers Resume Back To Splurge-Mode

June 12, 2009

Luxury merchants shouldn’t expect affluent shoppers to go back to splurging anytime soon, says Claudia D’Arpizio, partner and luxury goods expert at consulting company Bain & Co., who anticipates that the global luxury business will not fully rebound until 2012.

That means a wave of consolidation in the luxury industry over the next year or so as companies try to survive, she said. Luxury chains continued to be the weakest retail sector in May with Saks Inc., for example, reporting same-store sales 26.6 percent lower than a year earlier.

D’Arpizio told a group of journalists Tuesday that she forecasts a 10 percent decline in luxury spending worldwide for this year, after spending was flat in 2008. She foresees sales remaining at 2009 levels in 2010 and then rising 4 percent in 2011 and gaining 7 percent to 8 percent for 2012.

While big global brands have more muscle to endure the slowdown, D’Arpizio said, “everyone is experiencing a reduction,” and merchants need to come up with a better store experience and to target younger shoppers and working women to stay viable.

Luxury retailers —confronting a persistent falloff in spending on luxury goods since the financial meltdown ballooned last September — are starting to offer more merchandise at entry-level designer price points.

But shoppers who enjoyed discounts up to 80 percent last fall and during the holiday shopping season, aren’t likely to see promotions that grand later this year, D’Arpizio noted. That’s because upscale stores have cut their orders by 10 percent to 15 percent for the holiday season and next spring.

Clothing sales are expected to continue to suffer bigger sales declines than the shoe category: Shoppers are buying fewer pairs but are unwilling to switch to cheaper options, D’Arpizio said. Among the hardest hit geographical areas are Europe, Japan and the Americas, while China is expected to show a 7 percent gain in luxury sales this year, according to the report, to be formally released later this week.

Luxury shoppers from the ultra rich to the aspirational have cut back, just in different ways, D’Arpizio said. Shoppers at the highest end are buying less ostentatious and more “classic, more durable” pieces, while aspirational consumers are trading down to the more affordable secondary lines of designer collections.

D’Arpizio said that when the economy recovers, shoppers’ focus on the best quality for the money will linger.

Excluding retail giant Wal-Mart Stores Inc., May marked the 10th straight month that same-store sales have fallen industry-wide compared with a year earlier, according to a tally released last week by Goldman Sachs and the International Council of Shopping Centers. Same-store sales — sales at stores open at least a year — are considered a key indicator of a retailer’s health.

For further information, visit: http://www.topix.com/business/retail/2009/06/luxury-sales-not-likely-to-show-full-rebound-until-2012-bain-co-luxury-analyst-predicts

Sample Sales Are No Longer Exclusive

June 9, 2009

It’s the summer of the sale. Designers and retailers saddled with extra merchandise that didn’t move because of the economic downturn are trying to get rid of it — at steep discounts.

Last week, Gabay’s Outlet in the East Village (225 First Ave., gabaysoutlet.com) became a temporary downtown Henri Bendel outpost when it received huge shipments of designer denim, dresses and signature Bendel knits from the uptown luxury retailer, all marked down by 50% to 80%.

This month alone promises more than 20 sample sales, including designers like Gucci, Prada and Rag & Bone.

“I think we’re reaching a peak right now,” says Kathryn Finney, founder of thebudgetfashionista.com. Her prediction: This kind of leftover glut won’t happen again!

“I think toward the end of the year, we won’t see that many crazy, wacky sales — not at the level we’re seeing now,” says Finney (above). “I think the recession really took the retail industry by surprise and a lot of retailers have adjusted production for fall/winter.”

She’s got a few tips for maneuvering the bargain basements:

How do you find out about sample sales?

A lot of high-end designers, like Vera Wang, Prada, DVF, Vivienne Westwood and Ferragamo, are marketing their sample sales. In a given week we get 30 to 40 notices of sample and warehouse sales. Prada’s sample on Sullivan St. used to be very exclusive and you had to really be in the know. Now, you don’t have to be an insider. Go to thebudgetfashionista.com/sales for an up-to-date listing.

What kinds of deals are you seeing at sample sales and discount retailers?

There are definitely better deals on more luxury pieces and better selection. It used to be at sample sales that unless you went first day, all that was left was the stuff you didn’t want.

Now it’s actually stuff you want. You can find Ferragamo shoes for $50 to $75, Vera Wang wedding dresses for $300 to $400.

Why are we seeing such steep sales, especially from luxury brands that don’t normally get marked down?

They produced all these things they couldn’t sell, so I think that’s why we’re seeing a lot of these warehouse and stock sales. All the gluttony of things they couldn’t sell six months ago — they’re trying to clear their warehouses.

This was stuff that was made to sell, stuff that is left over in their stock, and they need to move it. It costs money to store the merchandise, and the longer it sits there the more it costs them. So it’s better to get rid of it, which is why you find things at Gabay’s.

Are there still deals to be found shopping at the major department stores?

Department stores are offering coupons, especially if you have a store credit card, because people aren’t using them right now. If you buy at Macy’s with your store card and, say, they’re having a sale in three or four days, you can buy it on sale that day and they’ll ship it to you later when it goes on sale.

You don’t even have to be there for the sale — it’s called a presale. And you can get alterations done under presale. This is what they’re offering in order to generate loyalty.

You can negotiate other perks, like free shipping and free alterations, in addition to the discount. Before you go to any store, you should go to their Web site for coupons.

Lord & Taylor has really good deals. They have sales every week. You can get coupons online (lordandtaylor.com) and you don’t need a store credit card to use them.

For further information, visit: http://www.nydailynews.com/lifestyle/fashion/2009/06/04/2009-06-04_sample_sale_frenzy_.html

Consumer History Data Is Irrelevant: Forecasting On Current Consumer Buying Behaviors

June 9, 2009

During the first day of IE Group’s Consumer Packaged Goods Forecasting and Planning Summit last week, almost every speaker reiterated that historical trends and year-over-year comparisons do not carry the same weight that they have in the past. And although these metrics are still valuable for forecasting, many other factors now need to be considered due to the rapidly changing economy and buying behaviors of consumers.

One of the main thoughts behind this reconsideration of traditional methods is that consumers are saving again and, thereby, taking money out of the market. Pat Conroy of Deloitte Consulting estimated that if consumers save just seven percent more than they have in the past – not an unlikely scenario, according to his research – they will be removing $500 billion from the economy. He also made an excellent point that, as consumer spending goes down, a greater percentage of the money that they do have to spend may be allocated toward services vs. products – his theory being that their expendable income will go toward fixing products they already own to stretch their investments.

We also heard in the presentations that there is a new attitude – “Frugal is cool.” People are buying fewer luxury items. Even those consumers who can afford them are leaning toward purchasing less conspicuous and more “everyday” products. Another factor affecting purchasing is the general fear in the market coming about due to the government’s explosive spending, the housing crisis, the banking and auto crisis and more.

Tim Weidenhaft of General Mills echoed the sentiment that shifts in demand patterns due to economics also makes purchase history less relevant. He pointed out that this is causing higher demand volatility and a resurgence of coupon redemption.

A key sentiment in many presentations was that automating the integration of POS scan and forecast data and integrating it with things like promotions, shipments, forecasts and orders through applications like POSmart, is a critical factor. Also, leveraging panel data, weather trend data, syndicated data and even economic data that can be purchased through third party sources are several more ways to improve forecasts.

For further information, visit: http://www.retailwire.com/discussions/sngl_discussion.cfm/13781

Retail Sales Rise

May 27, 2009

Retail sales in the United States rose in the week ending May 23, the International Council of Shopping Centers-USB reported Wednesday.

Sales were up 0.8 percent in the week and 0.5 percent compared to the same week a year ago, the report said.

Around the country, “favorable weather helped trigger some seasonal spending,” the weekly report said.

Temperatures averaged 1.8 degrees Fahrenheit higher than the same week a year ago, Weather Trends International said.

Store traffic during week picked up “appreciably” in grocer, drug, discount, office supply and clothing outlets, the report said. For further information, visit: http://www.upi.com/Business_News/2009/05/27/Retail-sales-rise-in-week/UPI-98931243435583/

Recession-Proof Denim

May 26, 2009

For fashion blogger Jessica Morgan, finding the right jeans is almost a religious experience.

Morgan just bought a pair of $100 Madewell jeans, but her denim nirvana comes from True Religion Apparel Inc. of Vernon. Even at $170 to more than $300, the designer dungarees represent a sacrifice she’s willing to make despite the fraying economy.

“They make my butt look perky,” said Morgan, 33, who owns five pairs of True Religion Brand jeans. “That is the Holy Grail of jeans.”

“For women in Los Angeles, who wear jeans almost all of the time, it’s an investment,” said Morgan, half of the duo responsible for the popular “Go Fug Yourself” blog devoted to outing celebrity fashion victims. “If I wear them every day, they really are not that expensive.”

While consumer spending remains woefully depressed, expensive designer jeans have been one of the few bright spots for manufacturers and retailers, according to NPD Group Inc., a market research company.

Sales of premium brand jeans grew by 17% during 2008 and eked out a 2.3% increase in the most recent three-month period that ended in February, making premium denim one of a few “pockets of growth in an otherwise fizzling fashion market,” NPD Group said.

“That is the time period that was the most challenging in terms of consumer spending, so any growth during that time is significant,” said Marshal Cohen, NPD Group’s chief industry analyst. “With the newfound focus on fit by some of the commodity brands coupled with women’s never-ending quest for the perfect pair of jeans, the passion for denim is alive and well.”

Denim is one area in which some of the most fundamental rules of the global economy don’t appear to apply. Other industries turn to the least expensive foreign labor pools for production. Jeans makers have found that the high cost of manufacturing in the U.S. is actually a selling point.

“In the U.S., people care that their jeans are manufactured here,” said Eric Beder, an analyst for Brean Murray, Carret & Co. “To consumers outside the U.S., it’s crucial. Jeans are considered an American tradition. To be considered a real premium brand, you need to have the ‘made in the USA’ label on it.”

Adriano Goldschmied, the Italian designer of European jeans brands Diesel, Replay, Goldie and Rivet, agrees. In 2007, Goldschmied’s luxury denim label GoldSign merged with Paris-born Jerome Dahan’s Citizens of Humanity, based in Huntington Park.

“Nothing more than jeans represent the spirit of America,” Goldschmied said. “It’s about going to the mall, driving, having fun at the beach. Jeans still represent the life.”

Denim buyers aren’t going to pull the U.S. economy out of recession, but “it does show that there are people out there who are willing to pay for this sort of thing,” Beder said. “It’s a relative bargain. The most you are going to pay is $200 to $300. It’s affordable luxury. It lasts, and it has a lot of versatility that other clothing items do not have.”

Karen Short, an analyst with Friedman, Billings, Ramsey, said that this year has been tough for even the most resilient brands. Short noted that it is difficult to maintain sales at boutique clothing stores when the boutiques are folding.

Recent financial results show that the few publicly held premium jeans manufacturers are holding up fairly well.

True Religion beat analysts’ expectations with first-quarter net income that increased 10% to $7.6 million and net sales that rose 19% to $63.6 million, year over year. Joe’s Jeans Inc., a Commerce company whose pants retail for $120 and up, saw net income more than double to $800,000 and sales increase 8% to $16.5 million. Guess Inc. posted a 12% boost in adjusted net earnings of $55.3 million, excluding a $22.3-million non-cash impairment charge, and a 9% increase in revenue to $561.1 million in its most recent quarter.

But VF Corp., which owns brands such as low-cost Wrangler and high-cost 7 for All Mankind, said first-quarter profit fell 32% to $100.9 million and revenue slipped 7% to $1.73 billion as shoppers shied away from its upscale denim.

Some companies are trying to combat faltering consumer spending, in part by opening more of their own stores.

Joe’s Jeans and True Religion made up for weakness at department stores and boutiques by going directly to customers with their own stores and websites. True Religion’s direct sales increased 96% to $23.1 million. The company had 49 of its own stores by the end of the first quarter, up from 18 stores in March 2008.

“The most important thing about my jeans is the fit,” said True Religion chief Jeffrey Lubell, whose products are made in L.A. “I try to make your jeans feel like they have been in your closet for 30 years.”

At the recent opening of the True Religion store at the Westfield Century City Shopping Center, the retailer’s 51st, Scott Icenogle, a marketing director at MGM, bought a pair of straight-leg Ricky jeans. Icenogle, 39, said he was treating himself after getting a break on his 2008 taxes.

“They fit me well and I know they are going to last a long time,” the Hancock Park resident said.

Joelle Forte Casady of Castle Heights is another true believer in quality denim. The wardrobe stylist recently added to her collection of about 30 pairs, which includes five by Hudson Brand and 12 by Frankie B.

“I wear jeans five out of the seven days of the week. If I’m spending $150 to $250 a pair, I feel I’m getting my money out of it if I wear them 10 times, and I wear them a lot more than that,” Casady said. “That’s instead of some sexy heel shoes I might wear six times a year.”

“When you think it looks nice and feels right on you,” she said, “then it is worth every penny.”

For more information, visit: http://www.latimes.com/business/la-fi-jeans22-2009may22,0,2251065.story