- The Washington Times - Friday, December 17, 2004

NEW YORK — This holiday season, Vincent Cassanetti, 60, a wealthy retired business owner, is helping to keep luxury sales booming.

The Palm Beach, Fla., resident has spent $50,000 on gifts for his wife and children, including $600 shoes from Jimmy Choo and Chanel, as well as designer handbags, jewelry and clothing. That’s up from about $35,000 a year ago.

“This is a really good Christmas,” he said.

But that’s less the case for Eileen Brosko, 70, a retiree who has seen her stock portfolio dwindle to a quarter of its value a few years ago.

“At my age, I am not doing too much buying. I don’t feel secure,” said the Parsippany, N.J., resident, who was visiting Manhattan on a recent Saturday. She, her husband and their family exchanged names and are limiting the price of gifts to no more than $50 each. For her grandchildren, she bought tickets to a show at Radio City Music Hall.

Those contrasting approaches help show why the holiday 2004 season for retailers is turning out to be sharply divided between the haves and have-nots.

Luxury stores like Neiman Marcus, Nordstrom, Saks Fifth Avenue and small designer boutiques are seeing robust sales of such items as $8,000 mink ponchos, $1,000 snakeskin handbags, $200 crystal-studded jeans and $25,000 bejeweled bangles because their well-heeled shoppers have benefited from a recovering economy.

An influx of foreign tourists taking advantage of the weakened U.S. dollar also has helped boost sales at high-end stores — as has a fixation among some consumers — no matter what their income — that they need products with status labels, even if it’s a box of $30 French chocolates from Bergdorf Goodman.

“There is this quest of who is going to have the shiniest, boldest and brightest status symbols,” said Gerald Celente, director of Trends Research Institute, in Rhinebeck, N.Y.

Contrast that with the results of discounters like Wal-Mart Stores Inc. and midlevel stores such as Sears, Roebuck and Co. and May Department Stores Co. Inc., all of which have been struggling with tepid sales. Many are fighting hard with early bird specials on Saturdays, free gift cards, and special coupons.

This holiday season is “a real struggle for a broad range of retailers, other than the high end, and that struggle has a lot to do with the economy,” said Michael P. Niemira, chief economist at the International Council of Shopping Centers.

Chief among the woes has been this year’s surge in energy costs. While today’s average pump price of $1.84 is down nearly 20 cents a gallon from October, gasoline still costs 26 percent more now than it did a year ago. And the cost to heat homes this year could end up being 15 percent to 35 percent higher than last winter, depending on the weather and the type of fuel used, according to the Energy Department. Plus many shoppers are also faced with escalating health care costs and worries about jobs.

The spending gap was again apparent in retailers’ November sales. Among luxury retailers, Neiman Marcus Group Inc., which owns Bergdorf Goodman, had a 8.4 percent increase in sales at stores opened at least a year.

But Wal-Mart, which also got hurt by not aggressively discounting at the start of the holiday season, reported a meager 0.7 same-store sales percent gain. The weakness at Wal-Mart continued at least through the week ended Dec. 11.

The retailing industry needs middle-income shoppers to buy more because they represent the bulk of total spending. Marshal Cohen, senior industry analyst at NPD Group Inc., a market research company based in Port Washington, N.Y., estimates that U.S. sales of luxury products are expected to reach $42 billion this year, or 14 percent of the projected total of $300 billion. That would be an increase of 5 percent to 8 percent from 2003. That compares with a modest 2 to 3 percent growth overall. The figures do not include sales from autos, food stores and restaurants.

“Customers’ thirst for luxury seems greater than ever,” said Robert Burke, vice president of fashion at Bergdorf Goodman.

Bergdorf Goodman has sold out of such items as bangles, adorned with semiprecious gems, from Verdura, priced from $16,500 to $25,000, $535 Manola Blahnik leopard printed sandals and $1,700 brocaded jackets. Saks Fifth Avenue’s best sellers include $1,095 Dolce & Gabbana snakeskin handbags, exclusively made for the merchant, and $200 Seven jeans, adorned with crystals.

And New York-based fur and ready-to-wear designer Sherry Cassin, who sells to Saks Fifth Avenue and other upscale merchants, said she can’t keep up with surging demand for her mink ponchos, priced between $2,250 to $8,500.

Chevy Chase-based Saks-Jandel Inc., which has long catered to the Washington-area elite, cited such best sellers as bejeweled handbags by Valentino, priced from $1,150 to $2,350; and patterned jackets by Etro, which sell from $1,150 to $2,350, according to Peter Marx, president.

“Things are good. They are trending really well,” he said, adding that the store’s fur business is “fantastic.” Mr. Marx noted the store is doing a brisk business in sable fur coats, which sell from $50,000 to $80,000, as well as mink or fox wraps, which sell for about $1,000.

Even high-end toys are selling well. American Girl, a unit of Mattel Inc., has sold out of such doll accessories as $70 miniature beds and $48 spa sets. And while FAO Schwarz’s average selling price is $20, it’s doing well with a number of big-ticket items like collector dolls and life-size plush animals, both of which sell for several thousand dollars.

One customer snapped up a $100,000 FAO Schwarz gift card, and the upscale toy store has even managed to sell more than one $50,000 miniature Ferrari car, which children can ride around in, according to Kim Richmond, executive vice president.

To cash in on society’s overall obsession with luxury items, many popular-price stores like J.C. Penney Co. Inc. and Sears are coming out with their own affordable versions, such as fake fur capes and cashmere blend sweaters. That strategy doesn’t seem to be enough to excite customers, though, as they have been delaying holiday buying even later than they did last year.

Sears, which added three Saturdays of early bird specials to this year’s holiday calendar, is further sweetening the deal. It is giving out $10 gift cards for the first 100 customers that show up when its doors open at 7 a.m. today.

Don’t expect Jack Yeaton to be one of them. He wants the authentic big-ticket status items, even though he knows he can’t afford them.

At one time, “these things were so far out of one’s grasp,” said Mr. Yeaton, a 27-year-old Manhattan resident who works in public relations. “Now, they are the norm. … It doesn’t faze you to buy $300 shirts or spend close to $400 on Prada loafers. At this point, when is it going to reach the end?”

This holiday season, he has charged at least $2,000 on his credit card on gifts like a $850 Prada bag for his mother and $675 Fendi bag for his sister. He expects to pay off his holiday debt by the summer. Last year, he spent about $100 on each family member.

For himself, Mr. Yeaton splurged on a Prada sport jacket for $800, marked down from $1,050, and Prada loafers, reduced to $340 from $500. Those charges are on a separate credit card.

“I can’t help but walk down the street and wish I was trotting around in Prada shoes and a Gucci suit,” he said.

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