By  on May 23, 2008

NEW YORK — The designer flagships on Fifth and Madison Avenues here are feeling the pain and joining the song of the season: "Sale!"

While monobrand boutiques used to jealously guard their prices, putting spring merchandise on sale only well after Memorial Day, the weak economy and record-high gas prices have sent them into markdown mode earlier than ever — partially in response to department stores, which have done the same. Walk into major designer stores here and prices are being slashed by 30 to 40 percent now — and retailers said discounts are likely to go up to 60 percent in the next few days. The stores themselves often resemble Loehmann's and TJ Maxx more than chic lifestyle emporiums.

"The promotional atmosphere has picked up," admitted Tom Murry, president and chief operating officer of Calvin Klein Inc. "Everyone is pretty much aware the retail climate in the U.S. is more difficult this spring versus last spring. A function of that is more markdowns and earlier markdowns. We came out of a very long extended [period of economic] expansion and are now working our way through a slowdown. Oil prices are certainly part of it."

At the Calvin Klein boutique on Madison Avenue, the entire mezzanine was devoted to sale items, everything from ready-to-wear to innerwear, all at 40 percent off. There were suits in black, gray and ivory, a gaggle of LBDs, long black dresses, long chiffon fuchsia cardigans and gray sweaters. Even tourists are watching their money. "They buy small things like sweaters," a sales associate said.

Designer boutiques have been put in the uncomfortable position of having to compete with department stores and luxury specialty chains with which they do business. Saks Fifth Avenue, for example, on Tuesday said that aggressive promotions dented profit margins. "Just Cavalli went on sale earlier as a consequence of department stores breaking sales earlier than usual," said Enrico Di Muccio, chief executive officer of Cavalli parent IT Holding USA. "Currently only the pre-spring collection is on sale [at Just Cavalli]. The American consumer is more cautious for sure, but the European tourists who are so aware of the Just Cavalli brand are an incredible asset to the boutique right now."

 

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