Is the retail funk finally ending at the high end?
With the Dow topping 9,000 last week, Goldman Sachs publicizing - for better or worse -- record bonus payouts this year and the Luxury Consumption Index climbing 18.6 points, the stars are starting to align. In particular, the news bodes well for retail businesses that cater to affluent consumers.
According to Unity Marketing's July 2009 Luxury Tracking survey, some 48 percent of consumers of luxury products believe the worst is over. The Wealth Report earlier this month stated "consumer confidence is back up to levels last seen in September before Lehman Brothers imploded." and "Shares of luxury retailers have held their stock market gains, as investors overlook the current funk in luxury and focus on better times ahead."
In recent months, my own team has leased extremely desirable stores to businesses popular with this demographic, including artist Deborah Buck's Buck House at 1318 Madison Avenue in Carnegie Hill and Shoe Woo at 750 Lexington Avenue, directly across from Bloomingdale's. Even custom couture preservationist Madame Paulette, whom we worked with, garnered mega media coverage when it debuted its new home at Manhattan House. Not only did the tabloids cover the new location, which coincided with the business's 50th Anniversary, but the New Yorker weighed in with its own piece.
Downtown this summer we've already seen plenty of action. Lounge moved to Ladies Mile, DDCLAB expanded the brand to a third Soho location, this time at 7 Mercer Street, Lee Harkness Shirt tucked itself into 14 Prince Street and Abercrombie & Fitch's Hollister Store surfed into a four-level, 40,000-square-foot emporium on Broadway and Houston.
Madison Avenue, which reported a somewhat misleading vacancy of 10.5% earlier in the year, is swiftly being re-leased. Already Maison Lalique, Armani Collezioni, Chrome Hearts, Frette Luxe and Buckhouse have claimed new outposts. On Fifth Avenue, Swarovski is taking the Sergio Rossi store, Gant has expanded and Tommy Hilfiger and Joseph Edwards have new stores.
On a national level, it is reported that Henry Bendel is opening six new department stores. Hermes has plans for 20 stores throughout the U.S. and in Asia, Bulgari has announced 12 new units, and Coach has plans for 11 new stores. And of the high-end discount brands Talbot's Upscale Outlet is opening 12 stores, and Nordstrom Rack, which recently took over the old Circuit City space in Union Square, is scheduled to open an additional nine stores.
While no one is expecting the kind of uber exuberance once associated with the spending habits of wealthy consumers, it is also clear that the rich are beginning to again embrace their inner-shoppaholic. I predict that many of the fallow spaces along Madison Avenue between 57th and 77th Streets will soon be filled again. Moreover, we'll see plenty of fabulous, new businesses that a year ago could not have afforded the gilded mile or even find an opportunity to open there.
So after three anxiety-laden quarters that began 3Q2008, we're seeing the makings of a rebound at the luxury level. With a little bit of luck, the next bounce should bring better times for retail overall.