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Retailers in the West are banking on merchandise that provides good value to lift the bottom line this holiday season.
Merchants in Los Angeles, San Francisco, Denver, Las Vegas and Scottsdale, Ariz., like others across the U.S., said they expanded their price ranges and tested promotions to deal with difficult macroeconomic forces, including tight credit, the housing slump, weaker consumer confidence and high fuel costs.
In Los Angeles County, a bellwether for the region, the median home price sank 3.7 percent to $525,000 in October compared with the same month a year ago; gasoline climbed to $3.36 on Monday from $2.45 last year, and the jobless rate hit 5.6 percent, up from 4.8 percent in 2006.
“We expect it to be a little more challenging than in past holidays, but there are opportunities for us to do well,” said James Shimizu, chief marketing officer of Ontario, Calif.-based Anchor Blue, a specialty mall retailer with about 200 stores. He declined to forecast revenues for the season.
Shimizu indicated that shoppers seeking affordable gifts could end up at Anchor Blue, where denim sells for far less than it does at designer stores. “In recent years, we have had more of a high-low phenomena, and maybe that high will not play out as much this year,” he said, pointing to skinny-leg jeans and fake fur hoodies as key holiday items. Anchor Blue is touting its value proposition with a Black Friday promotion offering jeans at $19.99.
Jaye Hersh, owner of the Los Angeles shop Intuition, agreed that the most expensive goods may have trouble finding takers. She’s primarily stuck to under a $300 price point. “Up to $200 or $250, nobody is giving a thought to it,” Hersh said. “When it gets over that, I don’t want them to hem and haw.”
She is still looking for a 30 percent boost in volume, partly because she is adjusting the store’s selection for leaner times, avoiding the trendiest items and relying more on accessories and impulse gift merchandise. Marley rings from $20 to $85 and a $10 clear bag reading “Plane to See” have been popular at Intuition.
With the Writers Guild of America strike in its third week in what is a company town, “it is too early to see a trickle-down effect, but people are really watching what they are spending their money on,” Hersh said.
This story first appeared in the November 21, 2007 issue of WWD. Subscribe Today.
Beauty Collection, based in Van Nuys, Calif., has been less fortunate. The three-unit retailer has a store next to CBS studios, and owner Shawn Tavakoli said the average ticket has dropped 10 percent since writers walked off their jobs.
“There is a certain amount recession proof to our business,” said Tavakoli, who is anticipating a 6 percent holiday bump this year. “People still need cosmetics products, but they are not spending as much.”
Gift items such as a $70 Molton Brown kit and a $160 L’Artisan Parfumeur for Bottega Veneta candle keep merchandise moving during the holidays. Beauty Collection is trying to lure customers with a direct-mail promotion that gives discounts for purchases that top $75 and $100.
The strike is not the only cause of jitters. Layoffs at large companies such as biotech firm Amgen Inc. and mortgage lender Countrywide Financial Corp. have eaten into retail profits. In August, Thousand Oaks, Calif.-based Amgen announced it would slash its workforce of around 20,000 by as much as 13 percent. That same month, Countrywide in Calabasas, Calif., began sending layoff notices to sales agents.
Fred Levine, owner of 26-unit retailer M. Fredric, based in Agoura Hills, Calif., said his stores near the Amgen and Countrywide headquarters have taken a beating, but he thinks the impact is short term. “The worst of it has passed,” he said.
When the going gets tough, Levine doesn’t get scared into shrinking inventories and, instead, infuses them with sought-after designs. He is carrying a 30 percent heftier supply than last year. “The vendors have been chock full of incredible things,” Levine said. “It is that antidenim resurgence of fashion.”
Bahman Fakhimi, owner of 27-unit Planet Beauty, based in Costa Mesa, Calif., beefed up inventory about 10 percent over last year because he contends variety — most notably of gifts less than $60 — will help drive sales.
Overall, he estimated his business would increase 6 to 7 percent, an amount that would be exceeded if not for housing concerns at stores in San Bernardino and Riverside, a metro area that, combined, accounted for the most third-quarter foreclosure filings in the U.S. “Everyone thinks they have to save a lot more now,” said Fakhimi of the housing slump’s fallout.
Oren Hayun, co-founder of L.A.-based Planet Funk, which has 22 units in California, Texas and Colorado, argued that quality products at reasonable prices would catch consumers’ eyes. The chain’s assortment has expanded to a wider array of prices. This holiday season he is carrying Cheap Monday jeans for $80. “There needs to be a higher perceived value,” he said. “Two years ago, anything went.”
In Seattle and San Francisco, strong economies are translating into healthy sales at fashion boutiques. Customers in the northwest high-tech hubs, although not on a buying binge, don’t appear turned off by higher prices of European apparel, which is costly compared with U.S. goods because of the dollar’s falling value.
“The difference between $320 and $350 for my lingerie doesn’t matter,” said Victoria Roberts, who owns Seattle lingerie shop Zovo in affluent University Village with her husband Engle Saez. They expect holiday sales to be up 20 percent.
Like the Seattle area, Northern California’s robust high-tech economy has kept demand humming for designer fashions and luxury goods.
“We have a lot of clients who work at Google, Yahoo or law firms,” said Cristina Moe, one of three owners of Hush, which has units in Walnut Creek and on San Francisco’s Union Street. “We haven’t seen someone switching what they covet to something less expensive.” Recent hot sellers at Hush have included $300 chunky knit cardigans by Adam Adam Lippes and Alexander Wang riding jackets for $768.
For six months, Colorado has had the highest foreclosure rate in the nation with 7,155 homes in foreclosure, according to California firm RealtyTrac. Extreme weather also has affected holiday sales, which were soft last year because of two back-to-back blizzards that kept shoppers at home in November and December.
This year, a warm fall and temperatures of 75 degrees two days before Thanksgiving slowed sales of winter merchandise. But retailers in some areas such as upscale Cherry Creek, home to a mall anchored by Nordstrom, Neiman Marcus and Saks Fifth Avenue as well as a three-block adjacent retail enclave known as Cherry Creek North, said while gifting may not be robust, self-purchases haven’t slowed.
Elizabeth Lindsay of Elizabeth Lindsay Creations, a jewelry and gift boutique in Cherry Creek North, said customers are seeking reasonably priced gifts. “Most people are looking to spend between $50 and $100,” she said. “I have Pandora bracelets and charms that start at $25 and average $100 and I’ve doubled my order from last year.”
On the other end of the spectrum, Max Martinez of Max’s has been selling designer clothes for 23 years in his Denver, Boulder and Aspen stores. While his busiest seasons are spring and fall, his pre-collection business, which hits stores in mid-December, is increasing. “I treat those early spring deliveries as my holiday sales,” he said. “The weather has affected me more than the economy.” Martinez said dresses from Stella McCartney, Missoni and Narciso Rodriguez have been the most popular, with average price points of $1,200 to $2,000.
Although the weather can be iffy in mountain states, the consistent sunshine in the Phoenix-Scottsdale area has helped make it one of the fastest-growing retail destinations, with an already strong seasonal customer base.
“The economy may have somewhat of a negative impact on sales, and more than anything in our area, housing and tourism is affected by that,” said Randy Krebs, a buyer at Covet boutique. “We rely a lot on traffic from the Super Bowl, the Bowl games and golf tournaments, even though the residents are our main customers.”
To bolster his stock of emerging designers and premium streetwear (Dry Corn from Germany, Acme, Habitual, Smoke and Mirrors) Krebs ordered earrings and necklaces “because those make great gifts.” He also scaled back on premium denim.
For Krebs, the post-Christmas time is “getting bigger and bigger every year. In the last half of December, everyone waits to do holiday shopping because there are bargains to be found. “
Jennifer Croll, owner of two eponymous women’s apparel stores in Scottsdale, said her stores “are stocked up and ready to go for the holidays.” At Croll’s Kierland Commons store, there is more stock this year than last, especially dresses, ranging from $150 cocktail dresses to $2,000 ballgowns.
In Las Vegas, the penultimate tourist town in a state that is neck and neck with Arizona for population growth, economic factors appear to have had less of an impact. At the Wynn, divisional merchandise manager and fashion director Todd Hanshaw, in charge of the hotel’s eight apparel and accessories shops, said, “So far business is great. People want the special pieces and they know that it is a one-shot chance here.”
At Lior boutique in the Venetian Grand Canal shops, manager Francois Jaafar said about 90 percent of his customers are tourists making self-purchases. “They are not bargain shoppers,” he said. Hot selling items include Jiki evening dresses from $3,800 to $5,800 and jewelry by Pasquale Bruni starting at $5,000 and going to $38,000. “We always overstock for the holidays and mostly sell out on certain items, but we never run out of merchandise,” he said.
— With contributions from Joanna Ramey, Rachel Rees and Diana Ryu