Luxury retailers are poised for solid holiday sales

Photo of Tiffany jewelry on sale on eBay

by Jaclyn Giovis
Thursday, November 25, 2010

LOS ANGELES--Expect traffic on Rodeo Drive in Beverly Hills this holiday shopping season.

The rich will be striding back into their favorite stores, buying up expensive jewelry, designer duds and fancy trinkets.

For a while, even those who could afford to buy diamonds and $1,000 handbags stayed away from high-end boutiques and luxury department stores. Not anymore.

"You're seeing the pure luxury customer spending, and feeling comfortable that the future isn't doom and gloom," said Marshall Cohen, chief industry analyst with the NPD Group. That sort of optimism will bode well for the creme de la creme of retailers this holiday, he said.

Jewelry promises 'bling' for retailers
According to the National Retail Federation's most recent 2010 holiday shopping survey, about 20.3 percent of holiday gift givers say they will buy jewelry this year. That's up from 18.4 percent last year.

Jewelry will also be on more wish lists too - about 23 percent of those surveyed said they would request jewelry this holiday, up 13 percent from last year.

High-end retailers have already begun to see some sparkling sales heading into the holiday shopping season.

Tiffany & Co. on Wednesday reported comparable store sales rose 5 percent in the quarter, versus a 10 percent decline last year. Sales growth came from increased average price per unit sold as engagement, fine, and designer jewelry categories performed well.

Shoppers still buying expensive clothes
Luxury clothing retailer Burberry PLC said last week that net profits for the first half of the year rose 46 percent to $133.3 million from the year-ago period. The London-based fashion company, which is famous for its signature plaid coats and bags, said sales were boosted by its pricing strategy. The retailer did not succumb to the widespread discounting strategy adopted by many of its competitors last year; it kept customer favorites at full price.

Earlier this month, luxury department stores Saks Inc. and Nordstrom posted sales increases at stores open at least one year, beating Wall Street analysts' predictions. All of these retailers are forecasting holiday sales will push them to a stronger than expected finish this year.

Industry experts say the retailers' results are an early indicator that the luxury sector is turning around just in time for the critical holiday period. But strong results and a rosy outlook must be put into context: luxury retailers were among the hardest hit by the recession.

Core luxury customers got scared off by the uncertainty in the market. So-called aspirational shoppers (who would occasionally splurge on designer items) disappeared forever, Cohen said. Luxury retailers were hit twice as hard because they unwittingly depended on sales from both types of shoppers.

Still, Cohen said, it's going to be a better season for luxury retailers than it is for the mid-tier specialty stores and discount chains. Top brands, more so than others, have broadened their product assortments to appeal to their customers. But even they could do more, he said.

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