Over the last year or so, many consumers
traded downto discounters like
Wal-Mart Stores (NYSE: WMT) as credit
tightened and unemployment rose. Financial results from
high-end retailers such as
Saks (NYSE: SKS),
Nordstrom , and
Abercrombie & Fitch (NYSE: ANF) have been
nothing but ugly, as consumers looked for deals and shunned
expensive merchandise. But while the
death of luxuryseemed imminent not too long ago, the
market for big-ticket goods now faces a more uncertain
outlook.
According to a
Wall Street Journalarticle today, consultancy Bain
& Co. said that luxury-goods sales were expected to drop
by 8% worldwide this year. The consulting firm doesn't expect
a full recovery of the luxury-goods market until 2011 or
2012. But the firm did note that companies aren't being
forced to discount their luxury products quite so deeply,
suggesting that some shoppers are willing to pay full price
again.
On the other hand, researcher Unity Marketing asserted
that spending on luxury goods in the third quarter surged by
29% among high-income consumers, according to a Bloomberg
report. The news service also cited a
MasterCard (NYSE: MA) report indicating that
luxury sales increased 3.4% in September, which would mark
their first such gain since August 2008.
Don't get too excited, Fools. Rather than portending a
full-fledged recovery in the luxury market, this uptick could
simply represent a surge of pent-up demand among customers
weary of pinching their pennies.
Still, these signs of life may spell good things to come
for companies with venerated luxury brands, such as
Tiffany (NYSE: TIF) and
Coach (NYSE: COH). An unleashed lust for
luxury could also help retailers like
Costco (Nasdaq: COST), which often offers a
handful of high-class items at deeply discounted prices.
Whether these surveys bode well or ill, investors should
remain choosy about luxury-goods stocks. Despite September's
signs of increasing consumer confidence, real issues such as
high unemployment and overly indebted households still plague
our economy. Consumers may treat themselves to an occasional
high-end item here and there, but the
era of conspicuous consumptionis probably over for
now.
What do you think? Will the luxury-goods market's malaise
linger? Or are consumers
getting ready to binge on luxuryonce again? Leave your
comments in the boxes below.
This article was originally published as
Return of the Bling?on
Fool.com
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