Challenges ahead for luxury retailers

Retail leasing activity may be up on Madison and Fifth avenues, Retail Traffic reported, with more chains signing deals, but it hasn’t all been good news for retail.

At the end of July, the national Luxury Consumption Index, tracked by Pennsylavia-based Unity Marketing, fell 16.8 points to 66.0 points, registering the biggest drop since the beginning of the recession, as affluent consumers registered the fluctuation in the stock market and began to spend less on luxury goods.

“Our surveys tend to be a little ahead of what’s going on with luxury companies and what we saw in the middle of the year was a sharp and steep decline in the confidence level of luxury consumers,” said Pam Danziger, president of Unity. “These people are expressing a whole lot of concern about what’s going on and they are not going to risk their lifestyle to buy another bag or pair of shoes. That’s the kind of wave we see forming right now for the coming Christmas season.”

Howard Davidowitz, chairman of Davidowitz & Associates Inc., a New York City-based retail consulting and investment banking firm, says retailers are better-prepared to weather the downturn than they were when the recession hit.

Luxury chains “are not putting the money into full line luxury stores. Their money is going to online sales and outlet centers because those look like growth sectors,” Davidowitz said. “It sort of leads me to believe that they are thinking they better protect themselves; maybe the party is not here forever, and it will help them tremendously to have a growth vehicle.” [Retail Traffic]