By  on December 8, 2006

PARIS — Nobody expects it to be gangbusters, but European retailers say improved spending this year bodes well for a solid Yuletide selling season.

After several years of lukewarm business beset by endemic unemployment and low consumer confidence, retail spending is on a delicate mend, and overall economic data across the European Union is mildly improved. Yet doubts continue to cloud consumers' minds, and many households worry they will be worse off next year, according to various studies.

Spending on gifts is expected to gain 2 percent in Europe this year, according to a study by consulting firm Deloitte. But even if there's optimism, the outlook is far from simple to read and the pendulum could swing either way, retailers admit.

While high-end department stores have reported robust business in clothing and accessories as consumers move away from electronics as gifts this year, discount shopping is expected to be fierce. More Europeans are expected to spend more time comparing prices than in the past, according to studies.

Retailers have reported tough going in the toys category, which usually heats up only in the last two weeks before Christmas.

"People are shopping later and later for toys," said Michel Roulleau, assistant chief executive at Galeries Lafayette here. "The notable development so far is that people are spending more on clothes."

That development suits retailers just fine and underscores continued improvements over the entire year. According to GFK Market Research in Nuremberg, for example, German consumer attitudes in November were their most buoyant since 2001.

"The fact that the propensity to buy indicator almost matched the record level of October bodes well for the Christmas season," said GFK. Business is shaping up nicely in the former East Germany (where people generally earn less), according to GFK.

Italy is positive. Shoppers there are expected to spend 2.1 percent more during the holidays than they did last year, according to recent forecasts from retail and tourism trade organization Confesercenti.

"This won't be a Christmas of mad spending, of sky-high consumption, but Italians are prepared to spend what they have in their pockets to enjoy the holiday period," Confesercenti said.Confesercenti said clothing sales were expected to increase about 2 percent, and sales of electronics were expected to be flat. Toy sales in Italy are expected to drop 8 percent.

In the United Kingdom, analysts at Lehman Bros. predict "a relatively strong Christmas season," while Deloitte said gift spending would increase in France, though overall spending — which includes outlays for entertaining and food — would remain flat.

Most retailers polled informally across the Continent and in the U.K. said the season had started well, helped by November's colder weather after unseasonably warm weather earlier this fall.

At Colette here, Sarah Lerfel, who runs the store, said business was "going well" with a "good mix of French and international clients" and very busy business on weekends.

She mentioned Yves Saint Laurent clothes and Brian Atwood shoes, as well as Chloé and Prada resort collections, as being strong performers. "And we can see the first Christmas gifts coming in music and books," she said.

At Bon Marché department store here, Severine Merle, the image and commercial director, said business in November had been "excellent" and that, based on that momentum, the store was "very positive" for the rest of December. "We are more positive than last year," said Merle.

"Clients are buying for themselves right now," she continued. "People are shopping later and later for Christmas gifts as a general trend."

That said, Merle noted that the store's gift shop, with many one-of-a-kind creations, including carved wood plates for 2,900 euros, or $3,857, and AOI antique kimonos at 450 euros, or $598.50, had started strong.

"What people want when it comes to holiday is a gift they can't find elsewhere," she said. "Our exclusive products are selling best, whether it's Jo Malone candles or Crème de la Mer moisturizer."

Another success story is jewelry. "Fashion jewelry is a real new phenomenon," said Merle. "Women are starting to buy jewelry like they buy bags."

Merle added that in accessories, Jimmy Choo shoes and Chloé bags continued to sell strongly, and Dries Van Noten and Marni had been good sellers in clothes.Over at Printemps, Didier Lalance, the store's managing director, said November was good and that he was optimistic for a strong end of the year. "Clothing sales will be better than last year, and luxury is doing well."

Galerie Lafayette's Roulleau singled out luxury, saying Gucci and Fendi handbags had been flying out the door, thanks to tourists from Asia, especially China. "Chloé also continues to explode, both in clothes and bags," he said.

In Italy, the 69-store Coin chain expects its holiday sales to climb about 5 percent, according to commercial director Francesco Sama. "We expect a better Christmas than last year," he said, noting that on average shoppers were spending about 3 percent more than last year.

Sama said the store's recent renovation and revamped product assortment had helped the chain, which sells mostly mid-market private label items, to garner new business.

He noted the beauty and home furnishings departments were expected to do the best business during the season.

Rosy Biffi, who owns four Biffi specialty boutiques in Milan and Bergamo and a Banner store in Milan, said dresses in velvet, jersey and gold lace were selling particularly well. She was doing well with all brands of leather boots and large designer handbags, including the puffy down-filled Spy Bag by Fendi and Moncler.

Nonetheless, Biffi said sales so far were flat compared with last year and that she hoped the momentum would pick up in December. She noted Italians were very attentive to price/quality ratios.

"Over the last two or three years, I've seen that customers look at the price, but [they are willing to spend] if they find something special," she said.

"I expect it to be a good [season since] there isn't the same air of negativity about the customers that there was five or six years ago," Biffi said.

Maddalena Pelucchini, store manager at multibrand specialty store Sugar in Arezzo, said sales so far were flat. "It's a season similar to those of past years. This big recovery that everyone wants hasn't materialized yet," she said. But she did note good sales momentum for Chloé bags and apparel, Roger Vivier shoes and a variety of merchandise from Yves Saint Laurent and Balenciaga.In London, retailers said sales have been steady, but customers were holding off until later in the season on Christmas purchases.

Olivia Richardson, women's wear buyer at Liberty, said recognizable brands, such as Vivienne Westwood and knitwear from Sonia by Sonia Rykiel, had been performing well, as had Marc Jacobs, Stam and Miu Miu purses because customers felt more confident buying gifts in a well-known brand.

Aimee Brown, women's casualwear buyer at Selfridges, agreed customers seemed to be waiting to shop. To counter that, the retailer lured customers into its stores with a Christmas Comes Early promotion. Its customer database was e-mailed vouchers worth a 20 percent discount in store.

Figures from retail monitor FootFall bear out the view that consumers are delaying buying Christmas purchases. For the weekend of Nov. 25 and Nov. 26, U.K. shopper numbers were down 15.1 percent from the same period last year.

"Department stores have really struggled," said Natasha Burton of FootFall. "We've had an unusually mild winter, so there has been a lot of [winter] stock hanging around. Consumers have also become a lot more savvy, knowing that there will be lots of 3-for-2 offers and one-off discount days."

However, at boutique Browns, a spokeswoman maintained customers were eager to snap up designer items early. "Our customers are excited and fully committed to buying key pieces early," she said. "Our cruise collections are definitely an area of growth, and this season we have introduced Derek Lam and Antonio Berardi."

The spokeswoman added that Christmas shopping initiatives, such as last weekend's ban on traffic on Oxford Street, didn't have much impact on sales. "Those events tend to impact high street stores more," she said.

A spokesman for Topshop said its Oxford Street flagship recorded its busiest Saturday on record last weekend, and said the season so far had been "extremely strong," with knitwear, skinny jeans and ankle boots performing well.

In Germany shoppers are getting a late start, too. At KaDeWe, Berlin's largest department store and the premium flagship of the Karstadt department store group, store director Patrice Wagner said warm weather was to blame."But that's not a problem," he added. "Accessories are always a good business as presents, and yes, women's wear functions very well, too. There are a lot of women who want to buy something for the celebrations, and December is the strongest [sales] month of all."

Wagner said the overall mood seemed to have lightened. "After many gray years and constant bad news, people are now saying, ‘I'll treat myself,'" he noted. "We have four weeks to go, and in the last four years, we've always generated a clear plus in the single or double digits. I expect that to continue."

KaDeWe is taking advantage of Berlin's recent liberalized shopping regulations, and in the last three weeks before Christmas will stay open Thursday through Saturday until 10 p.m., and Sundays from 1 to 8 p.m.

Berlin's new designer concept store The Corner can't compare this holiday season with the last, having opened last February, but owner Josef Voelk said, "Business has been better than expected. We are very happy with fall-winter and we have wonderful things coming for spring."

He said people were scouting for new presents. "They want to have new things, new candles, new accessories — not the usual bag. Marc Jacobs watches are flying out the door, and the new bag of Balenciaga is a huge hit, as is the new Givenchy bag. In fashion, everything with fur is selling, like Burberry Prorsum with fur collars or cuffs. And 6267, the new line from Italy, has been amazing. The first pieces flew out, and Phillip Lim has also sold out, including the reorder."

Other hits: cocktail and evening dresses from Azzaro, shoes from Christian Louboutin, oversize knits from Stella McCartney and Christmas cards from Mrs. Strong. "For three euros [$3.99 at current exchange], the cards just go. And we have the feeling people want to write again, so we want to push this type of thing."

At the 38-door Wöhrl specialty store chain in Germany, merchandiser Andrea Schober said, "Consumers are willing to buy, but the warm weather makes it difficult. Due to various Wörhl measures and events, however, we expect business to be good over the next few weeks."She said current fashion themes such as cigarette jeans, vests, scarves and shawls and Bermuda shorts were in demand. "I think at the end of the season, we will have reached last year's [sales] level," she said.

With contributions from Melissa Drier, Berlin; Nina Jones, London, and Amanda Kaiser, Milan

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