There will be no quick fix as the luxury sector tries to pull itself up by its crocodile leather bootstraps, analysts said.

This story first appeared in the January 11, 2010 issue of WWD. Subscribe Today.

That assessment came after high-end retailers, reversing a string of negative comparable-store sales, handily beat analysts’ comps projections in December.

Saks Inc., which has only recorded five monthly comp gains in the last 23 months, posted a 9.9 percent rise last month. At Neiman Marcus Inc., there has only been one comp increase for the same time period — December’s 4.9 percent gain — and Nordstrom was up 7.4 percent. Easier comparisons and more than a year of adjusting to the difficult economic climate helped.

“The luxury customer is probably seeing some signs of life,” said RBC Capital Markets retail analyst Howard Tubin. “I think it’s going to take longer for the aspirational shopper to come back, however.”

The aspirational shopper has probably traded down to off-pricers and will remain a bargain hunter for some time, he said.

Throughout the downturn, the mass merchant channel has picked up market share and made comps gains. In December alone, the sector registered a 5.4 percent average increase, according to data reviewed by WWD. The TJX Cos. Inc. and Ross Stores Inc. posted the largest increases across any sector, with a 14 percent and a 12 percent jump, respectively.

“Clearly, the luxury customer is still looking for a deal,” said Lazard Capital Markets retail analyst Todd Slater, who noted customers continued to shop at discounters, but also flocked to upscale stores, such as Saks, which rolled out its designer clearance event in early December.

“The department store group came in slightly ahead of expectations, indicating luxury may have found a bottom,” he said.

Shoppers seem to be looking for deals or compelling product, said Citi retail analyst, Kimberly Greenberger.

“There is strength at the high end and at the value end of the market,” she said. “It looks like everything else in the middle is not that great.”

Much of the striation in spending is tied to jobs, Greenberger said, noting consumers shopping at value-oriented chains are more affected by unemployment and financial instability.

The consumer who occasionally shopped at luxury stores — the aspirational shopper — “doesn’t exist anymore,” said Citi broadlines analyst Deborah Weinswig. “We will not see the aspirational shopper for a very long time.”

Weinswig expects the spending “bifurcation” to become more pronounced through the year.

Although the uptick in spending last month does not equate to a quick rebound, it has created tempered optimism after a dismal period.

Oppenheimer & Co. retail analyst Robert Samuels said he is “turning more positive on the consumer heading into 2010.”

“While we do not envision a rapid recovery, we think people will loosen their purse strings a little bit more, as became apparent over the holiday season,” Samuels said.

He downgraded value-oriented retailers, Aéropostale Inc., Ross Stores and TJX to “underperform” from “perform.” Although they are “very well-managed,” those firms “benefited over the past 18 month from the consumer trade-down,” Samuels said, which he believes “has peaked.”

Nordstrom, which has been producing comp gains since September, got a vote of confidence from Moody’s Investors Service. The company changed its outlook for the retailer to stable and gave Nordstrom a “Baa2” rating, saying it expects “sales will modestly improve and that gross margin levels will be stable” over the next 12 to 18 months.

However, Bjoern Petersen, vice president and general manager of the retail industry group at HP Enterprise Services, said there has been “a fundamental shift in behavior that will stay for a while,” adding consumers will shop based on need, unless there is an event such as holiday that “gives them a justification” to buy.

High-end consumers represent only a “sliver” of the population, Petersen said. With the aspirational customer out of the picture for now, upscale shoppers “are not enough of the population to boost retailers like Saks, Neiman Marcus and Nordstrom.”

In order to drive sales and top-line growth, retailers that are “going to outperform must continue to offer differentiated product or value,” said RBC’s Tubin. “The only problem is that Christmas is behind us now and there are not a whole lot of catalysts to buy.”

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