By  on November 20, 2007

PARIS — With transport strikes grinding traffic to a halt in France, credit worries among shoppers in the U.K. and general malaise across the Continent, there are plenty of reasons to worry that the Grinch may steal the Christmas shopping season in Europe.

The bright spot: luxury. Retailers said high-end ready-to-wear and accessories are driving business, and that the important rundown to the end of the year — so far — is shaping up favorably.

"We have very high expectations for luxury ranges and glamorous contemporary [fashion] from now until Christmas," said Cedric Charbit, general merchandise manager of women's wear at Paris' Printemps department store. "Gift purchases have started already."

Paul Delaoutre, general manager of Galeries Lafayette, also predicted robust business.

"Before Christmas last year, spending was a worry," he said. "Nonetheless, we had a great end of the year. The more worries there are about spending, the more people gravitate to discount and impulse buying. [For the latter] we are well positioned."

Even as French retailers expressed optimism, some said a sword of Damocles — in the form of prolonged transportation strikes — hangs over them.

"Without the impact of the strikes, the trends are very good this year," said Philippe de Beauvoir, president of Paris' Bon Marché specialty store. "We are quite optimistic for December, but we may have to revise our projections if the strikes become drawn out."

Strikes in France aren't the only potential blot on business. Another possible cloud is consumers' anxiety over purchasing power.

"Europeans in general are expecting a weakening of the economy in 2008," according to consulting firm Deloitte in a study released this month. "[That] does not bode well for year-end holiday spending."

Deloitte said the French anticipate their spending to increase a modest 1.4 percent, less than the rate of inflation. Average growth in holiday spending in Europe is expected to be around 3 percent.

Other countries are more buoyant. Spending in the U.K. and Ireland is expected to accelerate 7 percent despite tremors in the economy. And Spanish spending should gain 5.1 percent. Gift spending in Scandinavian countries is expected to increase 5.5 percent."Consumer purchasing power has been undermined by an accumulation of bad economic news: announced increases in basic food costs, increases at the gas pump already seen and interest rate increases on loans and credit cards," Deloitte said.

Retail sales in the U.K. fell last month for the first time since January, suggesting that recent hikes in interest rates by the Bank of England and the turmoil on financial markets is reining in spending there.

But luxury may weather the storm, said Tarlok Teji, head of retail for Deloitte in the U.K. "We expect there to be a notable rise in high-end, more expensive gifts purchased, particularly designer labels," Teji said. "Seventeen percent of consumers plan to buy more luxury items this year and 19 percent intend to buy a designer handbag or shoes as a gift for friends and family."

Julia Bowe, press and marketing director at Harvey Nichols in London, agreed that there was a sustained appetite for luxury. "We've had a very good year, and [we] are expecting a strong Christmas in our stores, restaurants and on our online site."

"We are a destination for luxury and indulgence for the individual and for gift giving, and expect both to continue to be strong for us," she added.

In a report this month, Verdict Research said reduced bonuses for financial workers and flat wages in the U.K. wouldn't deter spending.

"Shoppers never want to seem mean at Christmas and will postpone any cutbacks until the New Year," said Nick Gladding, retail analyst with Verdict. "However, having already run down their savings this year, consumers will need to rely heavily on credit to fund their seasonal generosity."

Shoppers are expected to be scouting for savings.

"Savvy shoppers will delay shopping in the belief that retailers will lose their nerve and offer pre-Christmas sales," said Gladding.

However, Nikki Scordi, managing director of London boutique Browns, described the city as "in full Christmas swing already — we are already getting clients coming in for their party season outfits as well as gift shopping. Both women and men are looking for something special and unique, and less so for that hot 'It' item," she said.Scordi said handbags in exotic leathers by Zagliani and Pauric Sweeny had proved popular this season, as had bags and shoes from Yves Saint Laurent and Fendi.

In Italy, consumers also are worried about their economic prospects. A quick survey among shoppers around the bustling Duomo neighborhood revealed that most were trying to save money while focusing most on their closest relatives.

Many said they would wait to shop until right before Christmas in hopes of finding bargains. But retailers remain optimistic.

"Our forecast for Christmas 2007 is very positive," said Vittorio Radice, chief executive officer of La Rinascente. "Our department store has had a very favorable year and we expect sales to accelerate for the festivities."

— With contributions from Nina Jones, London, and Alessandra Ilari and Francesca Vuotto, Milan

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