The U.S. economy’s funk is felt even in the luxury temples of fashion, the CEO of Barneys New York says.

 ”The economic downturn, unfortunately, is going to affect everybody,” Chief Executive Howard Socol told Reuters at the cocktail party launch of Donatella Versace’s menswear line at the Barneys New York store at 61st and Madison.

Known for cutting-edge fashion, Barneys is the first department store to exclusively offer Versace’s menswear 2008 collection. Previously, the line was available only in Versace boutiques.

 ”For 4-1/2 years, we’ve been in the mega-double digits,” Socol said, referring to percentage gains in sales growth. “Now we’re happy with single digits.”

The price of gasoline may not affect Barneys customers, he said. But even fashionistas will spend more carefully when the stock market is rocky, Wall Street lays off droves of people  and the national debate is over whether the U.S. economy has entered a recession.

 That’s where Barneys’ ability to lure top designers like Donatella Versace could work some retail magic. Ditto for creating buzz.

 The paparrazzi swarmed the store’s Madison Avenue entrance on Tuesday night when Donatella — in a tight black leather dress and dangerously high heels — vogued and vamped in the windows showcasing her clothes. 

 When asked about life under the new owner Istithmar, a Dubai-based investment company, Socol said, “It’s not been that different than when we were under Jones. They let us do our own thing. They let Barneys be Barneys.”

 As for the designer herself, Donatella Versace took a minute during the cocktail party to talk about why she chose Barneys for the department store launch of her menswear line.

“I always come to Barneys to shop. I love this store, especially the beauty department,” she said over the din of rock and roll spun by DJ Kiss on Barney’s third floor. “Everything at Barneys is unique.” 
   

(Photo courtesty of Versace)

Check out rising profit at General Mills

The maker of Cheerios cereal, Green Giant vegetables and Yoplait yogurt said cost cuts and worldwide demand aided results in its third quarter. Sales rose 16 percent in both its snacks and baking products divisions and 14 percent for Yoplait.

Still, not all is rosy in this challenging economic environment. General Mills expects higher input costs in the current quarter and said it plans to invest in consumer marketing to help drive sales.

Also in the basket:

Bargain hunters help Ross Stores

Dillard’s faces more shareholder pressure

(Photo: General Mills image library)

Check out a brewing tussle at Office Depot

The office-products retailer is fighting back one shareholder’s attempt to nominate two directors to replace both its current and former CEO on the board.

Shareholder Woodbridge Group said it planned to nominate an ex-president of Office Depot and and a former president of rival Staples as board members in hopes of revitalizing the retailer, which has been bruised by the economic slowdown that has led small business customers to cut back.

It’s yet one more hurdle for Office Depot, which disclosed last month that it faces a regulatory probe into allegations that it made phone calls to analysts last year warning that weak economic conditions were hurting sales.

The retailer is urging its shareholders to vote down the dissident board nominees. Stay tuned.

Also in the basket:

US Treasury Secretary sees economy in ’sharp decline’

Reebok to pay $1 million fine over lead jewelry

(Photo: Reuters)

Check out Walgreens’ push into health services

The drug store chain took a big step toward expanding beyond its retail business by announcing it planned to buy two health-care companies, publicly traded I-trax and privately held Whole Health Management.

The retailer has created a health and wellness division to manage health centers and pharmacies at worksites. Walgreen already operates consumer clinics in some of its stores, but now it sees a big opportunity to help companies lower their health costs.

“The story here is growth,” CEO Jeffrey Rein said.

Also in the basket:

Mattress maker Tempur-Pedic forecasts profit drop

Hard times for consumers threaten food companies

(Photo: Reuters)

AnnTaylor reported a quarterly loss on Friday as the struggling clothing retailer, facing lagging sales and falling store traffic, took a charge to restructure its operations. But not to worry — the CEO is aware of the problems facing the retailer and is “all over it.”

On a conference call with analysts, CEO Kay Krill reassured Wall Street analysts multiple times that the retailer was taking the proper steps to get business back on track.

Worried that AnnTaylor hasn’t realized its clients taste have evolved? Not to worry:

“Our clients’ product preferences have definitely evolved and we did not keep pace with her wants. She wants more modern and fashionable product that the is versatile and current, and we are all over that,” Krill said.

Anxious that AnnTaylor will make clothes at its namesake stores too trendy in an effort to drive sales?

“I don’t want any of you to think that we’re going off the deep end here. There is definitely a sand box that we’re playing in, we’re just going to go up more towards the edge of that sand box, so we’re all over it,” she said.

Skeptical that AnnTaylor can improve business at both its Ann Taylor and LOFT stores at the same time? Well, you can rest easy:

“It is absolutely my number one priority for 2008 and I’m all over it,” she said.

(Logo: Anntaylor.com Web site)

Check out new offerings for men from DKNY.

Fashion House Donna Karan International reached a licensing deal with Liz Claiborne to create a new line of men’s sportswear for the United States and Canada.

The collection, to include knits, trousers, blazers and coats, will be targeted to the “better” segment, with articles priced from $59.50 to $595. It will be available in department stores in fall of this year.

The move will help the fashion house named for Karan (pictured) reach a wider audience as other designers such as Vera Wang have partnered with retailers on clothing lines.

Also in the basket:

Nike finds problems at China factories

AnnTaylor reports quarterly loss

(Photo: Reuters)

When Wal-Mart decided it needed an environmental strategy, it asked for help from some of its biggest critics.

The only thing is, the non-governmental organizations it looked to for advice on building a sustainable business didn't want to ruin their green cred -- or jeopardize their relationships with their donors -- by admitting that they were working with Wal-Mart.

"We had to guarantee them that we would not ever tell anybody that they were there," Wal-Mart Chief Executive Lee Scott said during an appearance at the Wall Street Journal ECO:nomics conference in Goleta, California.

Since then, Scott said NGOs have been critical to helping the company understand issues such as sustainable fisheries and carbon dioxide emissions as well as pushing it to go farther in thinking green.

"They are more aggressive than we are, and they push us to go further, but they also have not been as judgmental about our failures as I was afraid they would be," Scott said.

Next, Scott said Wal-Mart will call on NGOs to help its Chinese suppliers clean up their act.

There are no brick-and-mortar stores to walk in, but Montgomery Ward is back–as an online and catalog retailer.

Revived in 2004 as a direct marketer, Montgomery Ward sells more than 50,000 items on its Web site and through catalogs. It is counting on its name recognition in the department store business to lure consumers who want to buy apparel, jewelry and home furnishings.

Founded as the world’s first mail-order business in 1872, Montgomery Ward operated more than 500 U.S. stores in its heydey before competition and declining sales forced it into bankruptcy in 1997. The last of its retail stores closed in 2001.

Direct Marketing Services Inc, a catalog marketer headed by David Milgrom, bought the Wards trademarks in 2004 and gave the brand new life on the Web.

Now, the company is looking to spread the word with marketing gimmicks such as a current “Tell a Friend About Wards and Win” promotion. This month, customers can register at www.wards.com/friend to get a chance to win a $100 gift card.

“Customers are happy to see that Montgomery Ward is back,” Milgrom said.

(Logo: Montgomery Ward)

Check out the falling sales.
 
The Commerce Department said U.S. retail sales fell 0.6 percent instead of rising in February like analysts had forecast.
 
In the latest sign of what could be a recession, consumers cut back on a wide range of purchases, including autos furniture, electronics, building materials, food and gasoline when compared with January.
 
And compared with February 2007, department stores saw a 4 percent drop in sales. That’s not a drop in stores open at least a year. That’s total sales, the latest sign of how hard that sector has been hit by the struggling U.S. economy.
 
“This is continued sign that the consumer is retrenching, we are seeing the housing wealth effects kick in, and the soft stock market. We have seen households wealth portfolio drop, and it looks like it is affecting consumer spending,” said Rudy Narvas, senior analyst at 4CAST Ltd.
 
The report comes a week after many stores reported weak same-store sales for February and as retailers wrap up reporting earnings for a fourth-quarter that really saw the weak economy take its toll.
 
As an example, on Wednesday, Men’s Wearhouse said profit fell nearly 72 percent in the quarter and it is expecting a challenging year ahead.
 
Also in the basket:
 
Revlon’s makeup Test (Wall Street Journal)

Target in talks to sell some credit card assets

(Photo: Reuters)

Check out the weak quarters at American Eagle and Talbots.

Apparently the tough U.S. retail environment is not age-specific.

American Eagle Outfitters, which sells teen apparel said fourth-quarter profit fell more than 6 percent amid weak sales, higher markdowns and competition from rivals.

The retailer also forecast first-quarter earnings well below analysts’ expectations as it has had to take higher markdown.

Meanwhile, Talbots, which sells apparel for women who generally are not in their teens, posted a quarterly loss, hurt by a charge related to its J. Jill business, store closings and declining sales.

But the company still posted a loss even without the charges. The company, like its rivals that also sell classic clothing to women over the age of 40, has struggled for more than a year with slow consumer traffic and declining sales.

Talbots said it is planning conservatively for 2008, with leaner inventories, better pricing and “more compelling” clothes in the fall, all of which it hopes will lead to a profit this year.

Also in the basket:

Economy faces recession, probably in Q1

Pilgrim’s Pride closing chicken facilities

Making the grade at meat judging (Wall Street Journal)