Luxury spending sparkles, execs say
NEW YORK (Reuters) - While discount retailers like Wal-Mart Stores Inc. (WMT.N) have seen sales battered by soaring gas prices and the slumping housing market, high-end shoppers are still crowding tony stores and buying expensive baubles, executives said at the Reuters Consumer and Retail Summit this week.
"The luxury consumer is spending again like mad because they've got the income, and the middle consumer is being cautious about how they spend," said Gilbert Harrison, chief executive of investment bank Financo Inc.
Rising costs for everything from milk to gasoline and the continuing troubles with the U.S. housing market have squeezed consumer spending overall.
But that doesn't seem to have ruffled the feathers of the wealthy.
Armed with hefty bonuses (especially for those on Wall Street), they are shopping for Chopard diamonds, and Gucci and Chanel products. Only those at the "lower end" are choosing between gas and clothes, Saks Inc. (SKS.N) Chief Executive Steve Sadove said.
"As much as $4.00 or $3.00 (per gallon) gas is an issue, I don't think that's as much of a driver as what's happening in the financial markets," Sadove said.
Analysts supported that view.
"The upper-income consumer kept spending in May, which is evident from stronger sales at more fashionable department stores and warehouse clubs that cater to these customers," Deutsche Bank analyst William Dreher Jr. wrote earlier in a note reviewing May same-store sales.
$100,000 PURCHASES
Retail research firm Euromonitor International said the U.S. jewelry market, valued at nearly $46 billion in 2006, up from $43.6 billion in 2005.
With seven transactions in the fiscal first quarter at over $100,000 each, "Our high end is just exploding," said Mark Vadon, chief executive of Blue Nile Inc. (NILE.O), an online jewelry retailer whose revenue comes mostly from selling engagement rings.
"We love that part of the market because those are the real influencers," Vadon said.
Buoyed by strong sales, the company recently introduced colored diamonds -- rarer and more costly than the traditional colorless ones -- on its Web site.
Tourists were also taking advantage of the weak U.S. dollar, strengthening the domestic luxury market, some said.
Sadove said Saks derives between 15 percent and 20 percent of sales from tourists who shop at its flagship store on Fifth Avenue in Manhattan.
And while Iconix Brand Group Inc. (ICON.O) CEO Neil Cole called the luxury sector "intriguing", Estee Lauder Cos. Inc. (EL.N) Group President John Demsey was grateful for shoppers' resilience.
"Anglo-Americans like to shop, God bless them," Demsey said. "It's a phenomenon that continues to baffle economists all over the world. The ability of the American consumer or the Canadian consumer or the British consumer to go out and shop ... regardless of the dynamics around him or her ... are amazing."
(For more on the Reuters Consumer and Retail Summit, see ID:nN18405178)
(For summit blog: summitnotebook.reuters.com/)
