Nordstrom has a waiting list for a Chanel sequined-tweed coat with a $9,010 price. Neiman Marcus has sold out in almost every size of Christian Louboutin “Bianca” platform pumps, at $775 a pair. Mercedes-Benz said it sold more cars in July in the United States than it had in any July in five years.
Even with the economy in a funk and many people pulling back on spending, the rich are once again buying designer clothing, luxury cars and just about anything that catches their fancy. Luxury goods stores, which fared much worse than other retailers in the recession, are more than recovering – they are zooming. And many high-end businesses are even able to mark up, rather than discount, items to attract customers who equate quality with price.
“If a designer shoe goes up from $800 to $860, who notices?” said Arnold Aronson, managing director of retail strategies at the consulting firm Kurt Salmon, and the former chairman and chief executive of Saks.
The rich are not spending quite as they were during the free-wheeling period before the recession, but they are getting closer to that level.
The luxury category has posted 10 consecutive months of sales increases compared with the year earlier, even as overall consumer spending on categories like furniture and electronics has been tepid, according to the research service MasterCard Advisors SpendingPulse. In July, the luxury segment had an 11.6 percent increase, the biggest monthly gain in more than a year.
What changed? Mostly, the stock market, retailers and analysts said, as well as a good bit of shopping psychology. Even with the sharp drop in stocks recently, the Dow Jones is up about 80 percent from its low in March 2009. And with the overall economy nowhere near its recession lows, buying nice, expensive things is back in vogue for people who can afford it.
“Our business is fairly closely tied to how the market performs,” said Karen W. Katz, the president and chief executive of Neiman Marcus Group. “Though there are bumps based on different economic data, it’s generally been trending in a positive direction.”
Caroline Limpert, 31, an entrepreneur in New York, says she is happy to spend on classic pieces, like the Yves Saint Laurent tote she has in both chocolate and black, but since the recession, she is avoiding trendy or conspicuous items.
“Overall, you want to wear less branded items,” she says. “If you have the wherewithal to spend, you never want to be showy about it.”
Still, she says, she is quick to buy at the beginning of each season.
“I buy things that could sell out,” she says.
The recent earnings reports of some luxury goods retailers and automobile companies show just how much the high-end shopper has been willing to spend again.
Tiffany’s first-quarter sales were up 20 percent to $761 million. Recently LVMH, which owns expensive brands like Louis Vuitton and Givenchy, reported sales growth in the first half of 2011 of 13 percent to 10.3 billion euros, or $14.9 billion. Also, PPR, home to Gucci, Yves Saint Laurent and other brands, said its luxury segment’s sales gained 23 percent in the first half. Profits are also up by double digits for many of these companies.
BMW recently said it more than doubled its quarterly profit from a year ago as sales rose 16.5 percent; Porsche said its first-half profit rose 59 percent; and Mercedes-Benz said July sales of its high-end S-Class sedans – some of which cost more than $200,000 – jumped nearly 14 percent in the United States.
The success luxury retailers are having in selling $250 Ermenegildo Zegna ties and $2,800 David Yurman pave rings – those encircled with small precious stones – stands in stark contrast to the retailers who cater to more average Americans.
Apparel stores are holding near fire sales to get people to spend. Walmart is selling smaller packages because some shoppers do not have enough cash on hand to afford multipacks of toilet paper. Retailers from Victoria’s Secret to The Children’s Place are nudging prices up by just pennies, worried that they will lose customers if they do anything more severe.
While the free spending of the affluent may not be of much comfort to people who are out of jobs or out of cash, the rich may contribute disproportionately to the overall economic recovery.
“This group is key because the top 5 per cent of income earners accounts for about one-third of spending, and the top 20 percent accounts for close to 60 percent of spending,” said Mark Zandi, chief economist of Moody’s Analytics.