Luxury Outsells High End With 'Value'

BOSTON (TheStreet) -- As $25 million homes sat on the market and the nation's idea of credit was reduced to cash in a mattress, it was a tough year for the high-end but a good year for luxury.

That distinction disappeared in the years leading up to the economic downturn, yet it is the line of demarcation between the winners and losers in this year's luxury market. Even as an International Council of Shopping Centers-Goldman Sachs(GS) survey indicated a 1.8% uptick in the luxury market last month, bankruptcies at retailers including Escada, Waterford Wedgwood(WATFZ) and Hartmarx(HTMX) show luxury's retail winners haven't been sharing the wealth this year.

"Value has become critical," says Greg Furman, chairman and founder of the Luxury Marketing Council. "Educating the best customer about the price-value equation so that people understand why one pays disproportionally for a Brioni suit, for example, is where the best marketers have gone."

Few companies illustrated this thesis as effectively as Hermes(HESAY). The silk stalwart and Kelly and Birkin bag producer's stock price plummeted from a 52-week high last December to nearly half of that value in early March. Yet, while Bain & Co. estimated a 12.5% drop in women's luxury clothing sales this year, it countered that predictions of the "it" bag's death were premature and that sales of leather goods would drop only 4%. That thinking held, as Hermes' stock price came almost all the way back behind a 1.4% increase in revenue over the past nine months that included a 10% bump last quarter. Its leather division's sales in the same period spiked 25%, driven by "very strong" demand for bags.