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Luxury Companies, Amid Gloom, Lure Clients

Stocks in this article: LVMUY SKS GUC

Consumer confidence is back.

In a sampling of 5,000 households in May, the Consumer Confidence Conference Index rose to 54.9 from 40.8 in April. As a result, a growing number of businesses are beginning to see a silver lining amid doom and gloom. Even luxury brands like Italian linen and home decor company Frette are seeing better results than last year. "We've seen some market improvement within the past 45 to 60 days," Chief Executive Officer Paul Raffin says.

Luxury companies such as Gucci, famous for its handbags, are having to work harder to attract customers.

But that doesn't mean luxury brands will see a return to boom times anytime soon, he warns. Companies including LVMH (LVMUY), Saks (SKS), Nordstrom (JWN) and Gucci (GUC) will have to do more to lure customers.

Consumers may be loosening their hold on their purse strings but Frette continues woo and push to get people to consider its brand. "Innovate, not hibernate," Raffin says. "Another thing I like to say is plan conservatively but act aggressively."

Here are seven strategies Frette and other luxury brands are using to weather tough times:

Be true to yourself: Don't apologize for being a luxury brand, says Stephen Kraus, co-author of "The New Elite: Inside the Minds of the Truly Wealthy" (Amacom). Companies that came out of past recessions knew who they were and did a good job communicating that to clients. Hermes, for example, fared well this past holiday season because, rather than cutting prices, it remained true to its company history of craftsmanship and exclusivity. "Hermes' implicit message was this is what we are and we're worth it, and it worked," Kraus says. "They have a waiting list for their bags because they are made by hand. It is authentic."

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