PARIS — Will shoppers spread enough holiday cheer to reverse the fortunes of Europe’s embattled retailers?
After several seasons of difficult going compounded by weak consumer spending and endemic unemployment, a spate of positive economic data from across the Continent seems to point to a boost in spending and consumer confidence. Meanwhile, European luxury houses also have signaled better sales on their home turf, reporting gains in Europe over the last six months.
And an overwhelming majority of European retailers expect strong watch sales during the next six months, according to a recent Goldman Sachs report.
But even if luxury accessories and high-end fashion are elevating business, the outlook is far from simple to read. A Europe-wide study released last Tuesday by consulting firm Deloitte found most Europeans plan to spend less this Christmas, with a majority saying they are worried about tough economic times. Thirty-one percent of European shoppers told Deloitte they would spend more time comparing prices before buying presents.
French shoppers said they would spend 3 percent less than last year; Germans, 9 percent less; Italians, 6 percent less; Portuguese, 6 percent less, and the Dutch, 5 percent less.
More optimistic were Irish shoppers, who said they would spend 8 percent more; Spaniards, 6 percent more, and shoppers in the U.K., 1 percent more.
Retailers in Continental Europe have struggled for some time, especially large discounters, while the lion’s share of European growth has come from exports and investment as private consumption has trailed behind in key markets such as Germany and France.
France’s Carrefour, for instance, has been unable to ratchet up growth at its key French hypermarkets, while Germany’s Metro has fared little better as cost-conscious customers also defect to more affordable discount channels.
On the flip side, the U.K’s Marks & Spencer reported a 63 percent increase in first-half profits, boosted by gains in women’s wear and a focus on full-price sales. But even Britain’s Tesco plc, which has been a juggernaut over the last few years, said last week its sales growth had slowed for the first time in two years and expressed concern over the impact of rising fuel costs and increasing household debt.
The mixed data have left some analysts scratching their heads as they contemplate how the pendulum will swing.
“The ultimate panorama doesn’t look good,” said Christian Devismes, retail analyst at Natexis Bleichroeder in Paris. “But in France, for some reason, retail has been all right, despite the negative climate.”
A spot check of European stores showed many to be optimistic in the run-up to Christmas. They count on the high-end to get shoppers to spend — even if they acknowledge the season is likely to be a tough trudge.
“I don’t see an easy holiday season,” said Philippe de Beauvoir, president of Paris’ Bon Marché high-end specialty store. “My instinct says that we are in for tough times. Of course, the recent riots won’t help. There is no élan.”
That said, Beauvoir expects his store to generate a 4 percent year-on-year increase — and hopes holiday will play its significant role after a tough October of unseasonably warm weather, although November was somewhat more seasonal.
A recent study in France by TNS Sofres found more French people plan to spend less this year on gifts. According to polling, 38 percent said they would spend less than last year (up 5 percent from last year’s survey), while 45 percent said they would spend about the same. Only 16 percent said they would spend more.
To tempt shoppers, many Paris stores have held early promotions.
Galeries Lafayette, the mammoth department store on the Boulevard Haussmann, gave 30 percent off a wide selection of merchandise. Hundreds of toys were marked down and the store’s charge card holders were offered 15 percent off almost all products.
Down the street at the Printemps department store, 30 percent was slashed off selected merchandise in pre-Christmas promotions, and charge card holders were offered various reductions.
Likewise, the Unger department store in Hamburg, Germany, started sales on Nov. 14.
Despite reductions, retailers said they expected fewer markdowns than in the past — good news for the bottom line.
Pierre Pelarrey, buying director at Printemps, said the store had “more special activities planned this year than in the past.”
He said the store hoped to drum up business with its “English Christmas” theme and corresponding activities: a “bespoke” cafe by Ozwald Boateng, a small Harrods boutique and a Portobello Road flea market installation, among others.
“The challenge is to get people into the store,” he said, noting — as most European retailers did — that October had been slow due to unseasonably warm weather. Colder weather has finally hit Europe, though, with temperatures in Paris hovering around 34 degrees.
Pelarrey said women’s fashion showed promise, with luxury accessories, including watches and jewelry, performing well. “Beauty has been more disappointing,” he said.
He said the store was gunning for a modest full-year increase.
Michel Roulleau, assistant chief executive at Galeries Lafayette, reported “satisfying” sales through the end of October. “August and September started very strong,” he said. “October was slower due to the [warm] weather.”
Roulleau said embroidered tops, jupons (petticoats), boots, big belts and military-style jackets had been top sellers in fashion. “All varieties of denim are still strong,” he said, noting that Bermudas also were hot.
He said Jean-Charles de Castelbajac had been asked to decorate the store to reflect a “royal Christmas” theme.
At Bon Marché, Beauvoir said expensive shoes and bags, as well as contemporary brands such as Vanessa Bruno and Isabelle Marant had driven business this season. “Chloé has also been very solid,” he said.
He said the store hoped to make up for lost ground in October with the two extra Saturdays in December, before Dec. 25 and 31.
“Apparel brands just under the luxury price point are top sellers,” he said. “As for accessories, it’s all about luxury brands. Shoes are strong. Beauty is not.”
In the U.K., retailers said the season had started on a sure footing.
Luisa De Paula, director of fashion at Liberty, said the London store had a “pretty good season” despite predictions of gloom rampant in the press.
“All of the doom and gloom in the press [about retail] leads customers to believe that there is a massive sale on the way,” she said, adding that unseasonably warm weather had complicated the holiday mood.
“There’s been no Christmas rush yet,” she said. Nonetheless, she reported double-digit growth on last year for the season, bolstered by a strong start to fall. Top sellers included women’s fashion and accessories.
“Dries Van Noten has been extremely strong this season, along with Roland Mouret — everyone wants [the Galaxy] dress,” she said. “Matthew Williamson is popular. Ann Demeulemeester this season has sold very quickly, particularly the jackets and coats. Anne Valerie Hache has also sold very well.”
Dresses in general have been “phenomenal,” De Paula said.
As for accessories, De Paula said high-end brands had stimulated growth.
“Bags from Chloé, Marc Jacobs and Miu Miu, and Dries [van Noten] scarves have done well. The growth is in the designer sector, as the middle market is suffering.”
At Harvey Nichols, buying director Averyl Oates said the store hoped to avoid steep pre-holiday markdowns. She said exclusive merchandise should contribute to the cause, including special versions of bags from top brands, such as Chloé’s Becky bag and a Stam bag in an exclusive blush pink from Marc Jacobs.
Oates said Alexander McQueen’s Novak bag had sold out. “Exclusivity — that’s how we are attacking sales and markdowns,” she said.
“We’ve had a very strong double-digit increase in contemporary,” Oates continued. “A lot of our business is coming through sales of Chloé, McQueen and Lanvin.”
In Italy, Soo-Hyoune Kim, director of La Rinascente’s youth-oriented retail concept Jam Store in Rome, voiced optimism.
“Christmas will be hard but you need to offer the right items,” she said. “Over the last few years, we’ve been selling more gadgets than clothing for gifts.”
She said the store is stocking up on gift items like dancing iDog robots, scented soaps and massagers.
Jam Store is doing swift business in colorful pom-pom scarves, funky rain boots with heels or sparkly crystals as well as T-shirts and other items bearing Betty Boop’s image.
“They have to be special and well-differentiated from other things,” she said of these bestsellers.
Rosy Biffi, owner of two Biffi boutiques in Milan and Bergamo and a Banner store in Milan, said fur, boots and bags were selling. Other top sellers include shearling and down jackets, cropped fur coats and ponchos and boots by Hogan, Gucci and Pirelli’s Pzero.
Whereas last year was about the “It” boot, the Ugg, she’s moving a wide variety of brands and styles in boots this fall season.
In Germany, KaDeWe, Berlin’s leading department store and the prestige flagship of the Karstadt department store chain, has just given its apparel floors a major facelift, which is paying off. Petra Fladenhofer, head of marketing, said the store’s women’s designer area was “slightly over plan” and that sales had gained 20 to 30 percent in the bridge department. Shoes had rocketed 50 percent and accessories are doing “super,” led by Chanel, Dior, Gucci and Louis Vuitton.
Fladenhofer characterized the current consumer mood at KaDeWe as “good” in spite of the ongoing uncertainty of Germany’s political and economical outlook. The store expects a “slight increase over last year” in Christmas sales.
Unger, a specialty store in Hamburg, has had a “very good season,” said co-director Florian Braun. But she said Christmas would require deft merchant skills.
“You really have to show skill, so that the women won’t have a bad conscience about spending money,” she said. “Our customers haven’t been financially hard-hit, but you need to be more convincing. It has less to do with fashion than the social climate. People even ask for discounts, which we never give.”
Such attitudes among shoppers remain representative of European retail challenges, as European growth is still lagging well behind the U.S.
The International Monetary Fund forecast the euro region will probably expand 1.2 percent this year, compared with 2 percent growth in 2004. By contrast, the U.S. economy, the world’s largest, is expected to expand 3.5 percent this year.
Such data keep merchants guessing just how Christmas will shape up.
— With contributions from Amanda Kaiser, Milan; Nina Jones, London and Melissa Drier, Berlin