DALLAS (TheStreet) -- For a brief moment in October, pessimism haunted the luxury market with ghosts of last year's sales and overstock. Then Neiman Marcus sold 50 Jaguars from its Christmas book at $105,000 a pop later that month. Happy holidays.

For most high-end retailers, the contents of Santa's bag are mixed at best. Consulting firm Bain & Co. predicts holiday sales to remain even or rise 1%, compared to a 5.3% drop last season. However, Bain expects luxury sales to fall 8% worldwide, with sales of clothing accessories, cosmetics and jewelry declining 16%. A full recovery isn't expected until 2011.

This year's holiday season is a microcosm of the naughty and nice news the luxury sector's been receiving all year. The

Claymore/Robb Report Global Luxury

( ROB) exchange traded fund, which counts

Luxottica Group

(LUX)

,

Coach

(COH)

and

LVMH Moet Hennessy Louis Vuitton

among its holdings, has more than doubled since March 6. However, it lost 60% during the year before that. Neiman Marcus, which owns luxury retailer Bergdorf Goodman, said same-store sales fell 6% last month, an improvement from last October's 27% drop, but far from pre-downturn levels.

While this year's Neiman Marcus Christmas book features over-the-top gifts such as a $250,000 ICON A5 sport aircraft with his-and-her pilots license training, nearly half of its items cost less than $250. In the last five years, only 30% to 40% of the catalog's offerings have been priced that low.

Tiffany

(TIF) - Get Report

slowed expansion efforts while adding cheaper products, such as its "keys" jewelry collection.

Saks

(SKS)

, meanwhile, avoided last year's 70% holiday discounts by cutting its stock 20% this season.

"That's what luxury retailing is about -- limited distribution and limited availability," Saks Chief Executive Steve Sadove said in an interview with

Reuters

last month.

While some high-end retailers are still cutting deals, as

Lord & Taylor

did by offering 15% storewide discounts and 20% off jewelry through Nov. 16, most have followed Saks' lead. Inventory as a percentage of sales plummeted from a high of 97.5% in 2007 to 91.7% this year, according to the U.S. Census Bureau.

"It's going to affect the consumer most of all because quantities will be limited and there will be less requirement for retailers to promote and discount it," says Alan Cohen, chairman of Abacus Advisors, a Closter, N.J.-based consulting firm.

Last holiday season, Bain says luxury retailers sold only 25% of their inventories at full price, compared to 50% the year before. This year, outlets and overstock retailers like

TJX

(TJX) - Get Report

will see a huge decrease from their 2008 holiday bonus.

"Last year, we saw enormous sales because the economy caught everyone off guard," says Mike Gatti, spokesman for the National Retail Federation. "This year, retailers know it's going to be a challenging holiday season and they've really managed their inventory."

They've also taken a cue from their downmarket competitors.

Nordstrom

(JWN) - Get Report

, whose third-quarter results disappointed analysts despite a 17% profit increase, now allows in-store pickup of online purchases, a tactic

Wal-Mart

(WMT) - Get Report

and

Sears

(SHLD)

introduced years ago.

In FAO Schwartz's case, downscaling was the only way to go. After an ill-fated foray into malls, bankruptcy and a brief period as a Macy's division, the high-end toy store was revived by Toys 'R' Us in May. While FAO's Web site and catalog have been rejuvenated - adding a floor piano modeled after the one in the movie

Big

-- its presence has been reduced to sites in New York and Las Vegas and to "boutiques" in Toys 'R' Us stores.

-- Reported by Jason Notte in Boston.

Jason Notte is a reporter for TheStreet.com. His writing has appeared in The New York Times, The Huffington Post, Esquire.com, Time Out New York, The Boston Herald, The Boston Phoenix, Metro newspaper and the Colorado Springs Independent.