Discounts come to upscale stores

Bob Wurtz scratched his head in awe when he saw the rows of designer clothes with red "30 percent off" signs in the Neiman Marcus at the Plaza at King of Prussia Mall last week.

"I've walked through here before, but I've never seen sales racks in here of this magnitude," said the 49-year-old hospitality management executive from Lafayette Hill, as he plucked a Chloe women's jacket for his wife for $405, down from $675, with an additional 30 percent off.

But Neiman Marcus wasn't alone in offering savings of up to 70 percent. The Nordstrom at the same mall was offering 40 percent off or more, and toney Saks Fifth Avenue was offering 40 to 70 percent off.

The luxury retail sector has been rocked this year by the same dismal economy that has everything from thrift shops to Wall Street staggering. Significant price reductions are proof of that, say retail analysts and economists.

"Before, the idea was to keep pricing out of it when you're a luxury department brand," said Erin Armendinger, managing director of the Baker Retailing Initiative, a retail industry center at the Wharton School at the University of Pennsylvania.

"They built their brands not on value and pricing. They built it on an experience and luxury," she said, "and now they have to play the value card for people, and that's an interesting position for them to be in."

Several high-end retailers reported double-digit declines in preholiday sales this year:

Neiman Marcus reported revenue of $324 million for the four weeks ended Nov. 29, compared with $360 million from the same period a year ago, a decline of 10.2 percent.

Nordstrom reported preliminary sales of $707 million for the four-week period ended Nov. 29, a decrease of 12.1 percent compared with the same four-week period a year ago. Same-store sales decreased 15.9 percent.

Saks Inc. reported sales totaling $332.9 million for the four-week period, compared with $347.6 million for the same month a year ago, a 4.2 percent decrease. Sales for the first 10 months of this year were down 2.6 percent compared with last year.

"The company continues to face very challenging macroeconomic and retail conditions," the company said in its November earnings report. "Customers continued to shift purchases from regular price to promotional and clearance priced merchandise."

Joel L. Naroff, chief economist at TD Bank, said the high end was doing what it could to broaden its customer base during these difficult times.

"If you're in the mall [as a high-end retailer], and you're offering 30, 40 percent off, you are lowering your price points enough to try to pull in the shopper that might have been considering coming in in the past but didn't because of the prices," he said. "When you're talking about Neiman and Nordstrom doing it, you realize it has hit most levels of retailers."

Still, a select few of the luxury names - such as Louis Vuitton, Gucci and Tiffany & Co. - which never discounted in the past stuck to that tradition.

"Louis Vuitton doesn't discount - ever," said a saleswoman candidly on a recent weekday at the Pier at Caesars in Atlantic City, an upscale shopping mall on the Boardwalk.

Coach, known for its leather handbags, had marked down footwear in some of its stores, including at the Pier at Caesars, but everything was full price last week at the one at the Promenade at Sagemore, an upscale outdoor mall in Marlton, N.J.

That didn't stop Michele McLaughlin from shopping for a silver Coach ring for her 15-year-old niece that costs $128.

"She's worth it," said McLaughlin, 47, a nurse from Center City. But she admitted she was scaling back on her spending this year.

"I'm only giving my nieces and nephews one thing each this year," she said. "I'm trying to watch it. On Jan. 1, I'm putting myself on a budget."

Nordstrom and Saks put up the red-tag sales earlier this year, and so did Talbots, an upscale women's clothing chain with more than 600 stores nationally.

Talbots reported total sales for the 13 weeks ended Nov. 1 of $357 million, compared with $414 million last year, down 14 percent. The Talbots store next to Coach at the Promenade was offering 40 to 65 percent off last week.

"Right now it's just not in vogue to spend money," Armendinger said. "It's not considered appropriate to be ostentatious or frivolous right now, so I think that's more the issue at the high end."

Women's clothing buyer Sean General at Boyds in Center City, known for its stylish men's suits and upscale women's fashions and shoes, has noticed this trend, especially among Boyds' clientele of working women in high-level positions.

"They're being more discreet about their spending," General said. For instance, he said, fewer of his female clients are opting to have purchases delivered to their offices.

"They want them delivered to their homes," he said. "They don't want to be flagrant in this economy."

General said sales of up to 40 percent throughout Boyds began two weeks earlier this year. Among the sales racks at Boyds was a Blue Duck mink coat that reverses into a raincoat for $2,998, down from $4,295; men's cashmere gloves for $79, down from $95. Men's designer clothes on the third floor were marked 40 to 50 percent off, and jewelry on the first floor was marked 40 to 60 percent off.

General said Boyds' year-over-year sales were flat from a year ago. But he said he was expecting a flurry of activity this week among those coming in with Christmas gift cards and those shopping for New Year's Eve attire.

"Flat is the new up," he said. "We just don't assume everyone is affected by [the bad economy], and if they are, they want an escape."

At BOSS Hugo Boss, located on the second floor at the Plaza at King of Prussia (where an average suit can run $850 to $1,000), the emphasis was also on the positive.

"Our staff is being encouraged to not discuss the economy with their customers," said Norman Vosco, president and chief executive officer of FashionWorks Inc., which owns and operates seven Hugo Boss stores in the region, "but rather to offer a friendly smile, positive conversation and some hospitality."

Vosco said taking customers' coats and bags, and offering them refreshments and snacks were ways to "relax them and make their shopping experience more pleasant and comfortable."

He said Hugo Boss started its red-tag sales earlier this year by a couple of weeks, and was offering an additional 10 percent off on certain items.

Economist Naroff said even the wealthy love a good sale.

"There are few people that don't like a bargain," he said.

Like Andy Grygiel of Center City, who purchased a Robert Graham shirt, originally $250, for $179 at Boyds for his younger brother, Steve, 45, on Christmas Eve.

"I've never seen that brand of shirt on sale," said Grygiel, 49, vice president of marketing for a San Francisco-based software company, as he waited for a valet to retrieve his car from among a fleet of Mercedes and BMWs lining Boyds' private parking lot. "It's a steal."