Shop Talk

Check Out Line: Surprise, surprise, a discount retailer is doing well

Check out the strong quarterly profit at discount retailer Dollar General.

The company, which prices most of its merchandise below $10, posted a stronger-than-expected profit thanks to bargain-seeking consumers who spent more per visit. Company executives talked of building sales momentum during the quarter and sales results in the current three-month period were encouraging.

As a result, Dollar General, which has received a boost from high U.S. unemployment rates, raised its full-year earnings forecast.

U.S. consumer spending rose in July at the strongest pace in four months, offering hope that consumers will be able to keep contributing to a modest economic recovery.

Meanwhile, overseas the message was mixed as Carrefour, Europe’s top retailer, said the summer sales trend was mixed in Europe but demand was holding up in emerging markets. Company executives acknowledged sales trends in Europe in August were slightly disappointing after a satisfactory July. 

French luxury goods group Hermes posted a 52-percent rise in first-half operating profit, boosted by leather goods and slightly raised its full-year financial targets, while in Australia retail sales were surprisingly strong in July, suggesting the economy there looks solid.

Also in the basket:

Noblesse oblige, but no service, for French luxury

From our apparel reporter Nivedita Bhattacharjee:

Luxury brands in the United States might still have a lot to learn from the entrenched design houses in Europe, but their commitment to pleasing the customer serves them well as the market returns from recession.      Milton Pedraza, Chief Executive of the Luxury Institute, told us during the Reuters Global Luxury Summit today that the commitment to customer service could even become a real point of differentiation for American brands.   “The American brands and even the Burberrys of the world tend to be better at customer-centricity, at service, and could make that a competitive advantage, because the Europeans are not as service-oriented, more product-oriented,” he said.      “The Europeans are not as service-oriented, (they are) more product-oriented, and they will even tell you that.”      If one is looking for an explanation behind the attitudes, Pedraza invoked a time well before Hermes opened its doors in 1837.      “A French executive told me that the word ‘service’ … is equated with servility and (goes) back to the French revolution and is why the French don’t like to serve anybody.”  (Photo: Reuters)

from Summit Notebook:

Retail in recession: bottoms, bananas and breeding

So, what did we learn from executives in the hard-hit luxury and main street retail sectors this week at the Reuters summits?

The idea of a "new normal" age of lower consumerism was in vogue, with many executives expecting consumers to continue to be thrifty for some time. Conspicuous consumption may be dead, they say.

Heck, even Tiffany's is attracting hagglers.

Even the Saks CEO is "Staycationing" in the downturn. Of course, not everyone is cutting back, so Hermes still needs supplies of crocodile hides to make $35,000 handbags. The company's solution? Breed its own.

The word "bottom" was also bandied about. Executives were hesitant to say the economy had definitely hit bottom. But many did see some leveling off. EBay CEO John Donahoe, for example, said he has seen some stabilization in demand, as did VF Corp CEO Eric Wiseman.

Taittinger chief Pierre-Emmanuel Taittinger isn't even concerned about the bottom line. Just bottoms up.

And about those young American women with the word "Juicy" on their sweatpants bottom? We may not be seeing that as much, said Juicy Couture President Edgar Huber.

Check Out Line: Austerity the “must-have” item for luxury buyers

Check out what top executives from the global luxury sector have to say.

Chief executives from Burberry Group, Hermes, Tiffany, Rolls-Royce and Richmont’s Van Cleef & Arpels are among the many officials who will speak this week at Reuters’ first-ever Global Luxury Summit about what their sector is facing amid a recession that has even well-heeled consumers dialing back spending.

In a new report, Bain & Co predicts sales of luxury goods are expected to drop 10 percent this year and not recover fully until 2012.

“Austerity is fashionable, even for the wealthiest consumers,” Bain partner Claudia D’Arpizio said.

Van Cleef & Arpels CEO Stanislas de Quercize said the French jeweler does not expect sales to rise this year even though it will open eight boutiques and Hermes CEO Patrick Thomas sees the luxury sector suffering for the next two years.

Some are more optimistic in the face of the slowdown. Burberry CEO Angela Ahrendts said the British luxury brand does not feel threatened by value-seeking shoppers, although she acknowledged “aspirational” consumers are unlikely to return to buying expensive coats and handbags any time soon.

Meanwhile, some retailers are already planning for something less luxurious: the back-to-school season.

They lust for Leiber and buy Coach

When it comes to luxury handbags , wealthy American women view Leiber bags as the most prestigious,  but most often buy Coach, according to a survey released on Wednesday.

The survey, conducted by a research firm called The Luxury Institute, found Leiber scored highest on its “Luxury Brand Status Index”, which includes measurements for quality, exclusivity, social status and self-enhancement (meaning the brand can make the buyer feel special).

Tied for second out of thirty luxury brands included in the survey were Hermes and Tod’s, followed by Jimmy Choo, Bottega Veneta and Valentino.

While those brands scored the highest in terms of perception, here are the brands that survey respondents said they purchased most frequently in the past 12 months.

Coach was far and away the bag purchased most frequently, according to 25.7 percent of respondents, according to the survey. A distant second and third were Kate Spade, with 4.6 percent, and Gucci, with 4.1 percent.

Coach was also the bag the biggest number of respondents (27.4 percent) said they would buy the next time they purchased a bag, followed by Kate Spade and Louis Vuitton.

Wonder if that has to do with the brand’s familiarity? When asked “which of the following brands are you familiar with”, 74 percent of the survey’s more than 1,000 women with annual incomes over $150,000 said they knew of Coach.