Retailers, consumers and prices
With the luxury of hindsight, Saks Chief Executive Stephen Sadove said he wouldn't hesitate to repeat the big markdowns of the 2008 holiday season if faced with the same tough environment that made the retailer the poster child of recessionary sales.
"It was the right thing to do to generate the cash," Sadove said at the Reuters Global Luxury Summit in New York.
The sale slashed prices on high-fashion, designer merchandise by as much as 70 percent, prompting a flood of media coverage and a slew of shoppers.
"It took some months to clear out the inventory. All the questions of vendor relationships --- every one understood very quickly it was the right thing for the business. I would have done it again," Sadove said.
Thursday’s sales reports showed that some consumers have started to buy their little luxuries again, a trend retail industry experts say is crucial for sales to rebound this fall and winter.
Michael Koskuba, Portfolio Manager for Victory Capital Management‘s Victory Large Gap Growth Fund, recommended that investors look into discount names with a discretionary bent, such as Target, which he owns in his fund.
from Summit Notebook:
So, what did we learn from executives in the hard-hit luxury and main street retail sectors this week at the Reuters summits?
American luxury retail has been, well, in shambles.
Since department store revenues began to plummet in September, luxury’s glossy image transformed to one that brings to mind strewn-about merchandise on a Saks Fifth Avenue floor.
Pricing structures have come under pressure as shoppers seek deep discounts, or worse, question price guidelines after aggressive reductions at the end of last year. In the spring, markdowns crept dangerously close to the start of the season. Clearly, discounts really are not what designers want their labels to be known for.
Metro AG, Germany’s top listed retailer, plans to cut 15,000 jobs or about 5 percent of its global workforce by 2012 amid a broader restructuring program, a source close to the company told Reuters on Tuesday. The company, which owns supermarkets and department stores, employs about 300,000 people in 2,200 stores across 32 countries.
Check Out mixed news on the retail sales front.
The retail data service of MasterCard Advisors said U.S. retail sales fell as much as 4 percent during the holiday season. SpendingPulse tracks sales activity in the MasterCard payments network and couples that with estimates for other payment forms.
Check out how the rich aren’t all that different from the rest of us after all.
They aren’t spending any money either — at least that’s how it looks according to the earnings for upscale department store Neiman Marcus.
Revenue fell 13 percent to $986 million in the first quarter, which ended Nov. 1.
Operating profit, excluding one-time items, fell almost 50 percent.
The results are not necessarily a surprise. Unlike other recent economic slowdowns, luxury retailers have been hit this time around, too.
But the earnings do serve as a reminder that this recession is a falling tide that grounds all boats.
Also in the basket:
Office Depot closing stores, distribution centers
Stores build up cash to weather the storm (WWD, subscription required)
Luxury lives! At least when it’s on sale.Today’s Manolo Blahnik sample sale brought out New York fashionistas looking for fabulous shoes on the cheap, and given the woeful state of the economy this year, they need it more than ever. The sale is typically held twice a year and is not widely publicized. Shoes that typically priced from $545 to over $1150 for tall suede boots were on sale from $100 for a simple pair of pumps to $400 for over-the-knee boots. Manolo Blahnik sends out an e-mail to their best customers and press friends, such as Vogue editors, who then tell their friends, and thus the word gets out.Most shoppers at the sale told us they will still buy luxury items like expensive shoes. But they are being more cautious and buying less these days.Cynthia Tabet of New York City said she buys new Manolos “every year,” but this year bought fewer pairs. “You’re tempted, but not as much” since the stock market tanked, she said. Tabet’s still on the fence about holiday purchases and is waiting to see if the economy picks up before buying.Picking through the piles of Manolos, Maria Jaqez of NYC also said she was “more cautious than usual,” but expected her holiday shopping to be “the same as last year.”Throwing caution to the wind was Tina Rich, also of NYC. The Cartier employee said she didn’t care about the ups and down of the stock market. “I’m just a little person, it doesn’t effect me!” she said cheerily, as she scooped up several pairs of pumps. “I wear Manolo’s and Dolce, that’s it.”(Photo/Reuters)
Check Out over 71 percent of affluent consumers, or 10 percent of American families, saying the U.S. real estate and banking crisis is affecting their sense of financial security and the value of their assets.
The poll, conducted by American Express Publishing and Harrison Group, says nearly 6 in 10 survey respondents are worried about running out of money, including 48 percent of America’s wealthiest families. That’s up from 35 percent in April. The survey was conducted Sept. 19-23 and included 614 people with a median income of $325,000.
Sparks flew at an investor conference when a male retail analyst asked Coach Chief Executive Lew Frankfort a question that has confounded men for ages — how many handbags do women really need?Here’s the transcript from that exchange:Analyst: What is the pantry load or the handbag inventory of most women? And what happens to older handbags? Obviously women pay quite a lot of money for them. I’m just wondering how many they keep… I mean, can there be a significant detriment to sales in the future, just because there are a lot of handbags in women’s closets?Frankfort: Let me ask you, are there any women in your life that you might be able to ask how many handbags are too many? Most of us men in the audience know that women do spend, and we see it in all of our homes. In terms of how much is too much? It’s a theoretical question.We also have a very large segment of America who do not own Coach bags, and we continue to bring new consumers in to our franchise at a very attractive rate, and what women tend to do with bags is they retire the bags. They go to a place deep into the closet, and they purchase a new one, and that’s the reality. I’m not sure where you are traveling with your questions.Analyst: I’m traveling towards a consumer retrenchment and how people are going to retrench, and what their inventory of handbags may be for whenever the right occasion comes up. It’s — you know, we’re in uncharted (territory) here economically.Frankfort: Everything is uncharted. Everything is empirical, starting with this very moment. What you need to do is make calculated bets based on what you know, and what you think. And if you are bearish on handbags, be bearish.At that point, a female Coach executive cut in: I have never heard a man say, I am so sick of my black wallet, I need a red one. I cannot tell you how many times I have heard women say, I have to have this year’s red handbag.So it’s a perceived need for a woman … I have to say something as the woman at the table.So, how many handbags (or wallets) do you have stashed away?(Photo: Reuters)