US luxury demand linked to stock market

The American luxury sector has survived the general retail volatility of the past year, posting robust sales as wealthy shoppers continue to devour luxury goods. In July, luxury sales excluding jewelry soared 11.6% year over year, the 10th consecutive

month of increases, according to data service MasterCard Advisors SpendingPulse, which estimates total U.S. retail sales. July sales were up 15.6% at Saks Inc., 7.7% at Neiman Marcus Inc. and 6.6% at Nordstrom Inc., outperforming the overall retail industry, Thomson Reuters said.

In the US, however, luxury shopping is tied closely to stock market performance. Analysts said rich shoppers could pull back again if their portfolios were affected and if they sense long-term volatility.

"There's both a buying-power issue and there's also a confidence issue, both of which have been pretty well shaken in the last week," said Mike Berry, director of industry research at MasterCard Advisors SpendingPulse. "Ultimately if it becomes a prolonged slump, it's going to magnify the confidence effect and could take it beyond just a blip sort of thing and really begin to impact people's behavior."

That would be bad news for the struggling economy because affluent shoppers wield outsized spending power: the richest 20% of households account for about 40% of total consumer spending in the U.S.

Luxury retailers say they've already noticed a shift in mood among wealthy shoppers. "Any time the market fluctuates like this, my business is impacted immediately," said Jodie Robinson, owner of casual couture women's boutique Anne Michelle, which has locations in Beverly Hills and Agoura Hills. "We were having a really good month and then it just fell off last week. People are not in a good mood to shop; it's depressing and uncertain."

While it may be too early for shoppers and retailers to panic, there is a wind of caution breathing through doors of luxury boutiques and brands.

Image: Rodeo Drive Beverly Hills
Source: Los Angeles Times