This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Luxury Stores Face Modern Horror: Frugality

Expecting a rebound for luxury retailers? Yeah, you might want to reconsider that position.

The sector is the weakest among retailers. On Wednesday privately-held Neiman Marcus said it swung to a loss in the third quarter of $3.1 million, compared with a profit of $55.4 million in the prior year. Revenue fell to $810.1 million from $1.06 billion.

Last month, Polo Ralph Lauren (RL - Get Report) reported that profit in the fourth quarter was more than halved on increased discounts, and Tiffany & Co. (TIF - Get Report) earnings plunged 62% in its first quarter.

May same-store sales in the sector also saw some of the biggest declines. Saks (SKS) posted a 26.2% plunge, while Nordstrom (JWN - Get Report) sank 13.1% during the month.

This weakness is not expected to slow near-term.

According to a report today by Claudia D'Arpizio, partner and luxury consultant at Bain & Co., high-end department stores and specialty retailers will not fully recover until 2012. D'Arpizio forecasts a 10% drop in worldwide luxury spending in 2009, after spending was flat last year and progressively worsened throughout the year. She foresees sales remaining at 2009 levels in 2010 and then rising 4% in 2011 and gaining 7% to 8% in 2012.

But what has been scaring investors the most is the fear that even after the economy recovers shoppers will be hesitant to return to their old lifestyle.

Retailers like Wal-Mart Stores (WMT - Get Report) have been claiming that they will retain shoppers who have traded down during the recession, even when confidence returns to the economy.

But what does this mean for the traditional high-end retailer? Well, D'Arpizio says the long-term prospects for the sector remain strong, as long as retailers invent better in-store experienced and find ways to target the younger shopper and working women.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
SKS $0.00 0.00%
JWN $48.20 -5.10%
KSS $41.95 -4.40%
RL $92.43 -2.20%
TIF $69.97 -1.50%


Chart of I:DJI
DOW 17,667.98 +16.72 0.09%
S&P 500 2,051.12 -12.25 -0.59%
NASDAQ 4,725.6390 -37.5850 -0.79%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs