Check out analysts’ calls on middle and upper income shoppers.

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.

“We thought, well, if things do start to improve they’ll be a beneficiary of that, and clearly we’ve seen the outperformance in the stocks,” Koskuba said of Target shares compared with those of Wal-Mart Stores Inc so far this year.

“The discounters in general, especially the ones that do have the discretionary component to them, I think are the one that will continue to do well,” he said, citing companies such as Target and off-price retailer TJX.  “I think those are sort of the areas that investors should be focusing on.”

Still, low-income consumers alone cannot ensure a retail recovery.

“While we believe market share gains for the discounters are likely to persist as the consumer remains focused on value and as the savings rate remains elevated relative to recent years, we are more positively disposed toward retailers in our coverage addressing the middle-to-upper-income consumer,” said William Blair analyst Mark Miller.

Michael Niemira, chief economist of the International Council of Shopping Centers, said he noticed encouraging trends in Thursday’s reports, such as Costco selling more televisions (albeit at a lower average price).

“You say, well, TV sales are deferrable, but that’s a discretionary purchase.  So there’s something beneath the surface that is, I think, a little bit more positive,” Niemira said. 

He expects a broader group of retailers to start posting positive sales results by the end of the year, and not just because they face easy comparisons since the end of 2008 was so abysmal.

“Even luxury will be participating in that,” Niemira said.  “I don’t think you can have a sustained consumer recovery without the luxury component strengthening.”

Also in the basket:

People would rather lose wallet than cellphone

Mattel accused of trying to influence MGA probe

Carrefour, Max Azria Discontinue Venture (WWD, subscription required)

(Reuters photo)

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.

Oh, and designer Jonathan Adler, who is hoping to make his store a "crack den of adorableness" during the holidays has his own way of generating sales: a $48 banana bud vase that he says is "so wrong."

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.

“For younger, newer designers, image is everything,” said fashion consulting firm Launch Collective’s Rob Spira, who recently co-curated the New York City Save Fashion pop-up shop to celebrate independent designers.

“Before, designers were coming to us for ideas to build funding,” Spira told Reuters at the Save Fashion store, which popular style Web site Refinery29 also co-curated.  “Now they’re looking for creative ways to sustain in this kind of environment.”

Refinery29 Editorial Director Christene Barberich said many rising designers complained recently that upscale department stores were canceling orders despite interest in their brands.

“These smaller companies don’t really have the resources to sustain their $60,000 orders when stores cancel,” said Barberich.

Save Fashion, around for a one month stint in the city’s Port Authority bus terminal, allows designers grappling with lower profit margins and less marketing money to sell their overstock at half-off or more.  The bright space houses about eight fresh designers every week — including Helmut Lang, Steven Alan, ACNE, Earnest Sewn, Rachel Comey, and Rogan — in a way that won’t recall “a shabby sample sale,” Barberich said. Rather, she dubbed it a “dream capsule department store.”

Save Fashion’s ad campaign, depicting a model wrapped solely in an American flag, says a lot. The event indicates a shift in how Americans may define high-end products once the smoke clears.

“Most of the designers here aren’t considered ‘luxury,’ but there is something about them that shows a future of luxury: smaller quantities, more care, more attention,” Barberich said, adding that some of the brands make their own patterns and trademark their own textiles.  “Here, it’s not dirt cheap, but it’s as cheap as it can be where the designers are still making some money or at least falling flat instead of going into the red.”   

Refinery29 Founder Philippe von Borries talks about alternative retail from the Save Fashion store

Department stores are expected to see a bumpy road to recovery this year.  In March, Fitch Ratings Services said it sees same store sales for luxury department stores underperforming the broader sector, with double-digit sales declines continuing in the first half.  Standard & Poor’s cut five department store credit ratings in April, sending Macy’s and J.C. Penney to junk status, and Neiman Marcus into even riskier territory.  Saks received a speculative B-minus rating from both agencies due to weakening store sales.

Meanwhile, the Dubai investment firm that owns Barneys New York gave the high-end store a capital injection last month to help it pay for its remaining shipments, one day after S&P cut Barneys to a deeply distressed ratings level.

“The nature of retail is changing,” Launch Collective’s Spira said.  “Despite the fact that we’re in challenging times, to the consumer it has to seem like everything is still beautiful.”

(Reuters photo)

Check out job cuts in retail spreading across the globe.

Last week, Neiman Marcus and Saks outlined plans to cut jobs. On Monday, it was Europe’s turn to join the fray.

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.

Meanwhile, British luxury goods firm Burberry announced up to $49 million of savings, including 540 job losses in the UK and Spain.

Burberry beat forecasts with a 9 percent rise in third-quarter revenue, helped by deep discounting. But the 153-year-old maker of upmarket raincoats and handbags said double-digit percentage growth in Asia and most of Europe was offset by a double-digit decline in the United States and a fall of over 20 percent in Spain.

“It’s extremely challenging, volatile and difficult,” said Chief Financial Officer Stacey Cartwright. ”It’s not about consumers trading down. It’s more about there being less footfall around and when consumers come in, they’re buying less.”

Also in the basket:

More peanut products recalled as probe continues

Crunched fashionistas still want novelty-experts

Australia’s wine industry at a crisis crossroad

TomTom cuts guidance, still within bank covenants

Centralizing at Hudson’s Bay Trading Co. (WWD, subscription required)

(Photo: Reuters)

Check Out mixed news on the retail sales front.

Retailers are now out to lure consumers with after-Christmas deals as data show this year’s holiday season was one of the weakest in decades.

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.

It found that luxury sector sales fell 34.5 percent, as job losses and stock market declines weighed on higher-end shoppers. Specialty electronics and appliance sales were off 26.7 percent.

But the news wasn’t all bad. Online retailer Amazon.com said this year’s holiday sales season was its best yet, with more than 6.3 million items ordered on its site on the peak shopping day of Dec. 15. Online sales were likely aided by winter weather in some parts of the United States.

Retail shares even turned higher on Friday — perhaps investors are more confident that it can’t get much worse?

Also in the basket:

Wal-Mart to sell 3G iPhone

Jones Apparel reduces lines of credit

British shoppers hunt for post-Christmas deals

(Photo: Reuters)

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)

(Reuters photo)

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.

“The affluent and wealthy, who account for 50 percent of U.S. consumption, are becoming more thoughtful, getting on top of their spending and worrying more about the future of their children,” said Jim Taylor, vice chairman of the Harrison Group.  “Nearly half of our respondents are owners of or senior officers in American businesses, so we expect the growing caution to spill over into capital and human resources decisions.”

Around 75 percent of respondents felt the country is now in a recession, and 60 percent thought the recession would last more than a year, up from 55 percent in June.

The wealthy are also less keen on buying luxury items.  Half of all respondents agreed that “a few luxuries are important in tough times,” down from 61 percent in April and June 2008. But only 2 percent reported eliminating luxury all together, opting instead to buy fewer items.

Also in the basket:

Constellation Brands profit tops view, keeps outlook (Reuters)

Next buys women’s fashion brand Lipsy for $31 mln (Reuters)

But Wait! There’s More! (Again) (NY Times)

(Photo/Reuters)

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)

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.

Compare that with only 11 percent for Tod’s and 10 percent for Leiber.

It looks like exclusivity really does lead to prestige.

(Photo: From Leiber website: “Exotically styled bag made of crocodile with magnetic flap closure and Austrian crystal trim” $5995.00)