Luxury Auto Shoppers Pass up Flash for Comfort

NEW YORK In a feature article by Laura MacInnis, Reuters stated that Luxury lovers, take heed: In the post-September 11, post-Nasdaq-boom world of American wealth, comfort is in, but excess is out.

High rollers are still buying expensive homes and cars without batting an eyelid, analysts say, but they are giving pause before picking up top-of-the-line jewelry or fashions.

``It's not that the luxury industry is closing down -- rich people will always have money. It's just a question of where they spend it,'' said Howard Davidowitz, chairman of the Davidowitz & Associates retail consulting firm.

While home prices have continued to rise, the evidence of a downturn comes in the form of tough times for those who sell pricey discretionary items -- like watches and jewelry.

``People still have plenty of wealth but I do think there are less celebratory things,'' said Davidowitz. ``There are less parties.''

Even before September's attacks, investors had lost more than $1 trillion wealth in the U.S. stock market. But the trauma of those attacks may have pushed the wealthy to put more of their expendable income into home comforts -- and less into baubles, experts said.

World-famous brands like Louis Vuitton Moet Hennessy , Gucci Group , and Neiman Marcus Group Inc. posted their worst year in recent memory in 2001 due to their exposure to consumer shocks.

As the economy starts to recover, however, home builders, car makers and top-line appliance retailers, are likely to cash in well ahead of shops carrying the hottest designer labels, retails consultants say.

RE-THINKING FRIVOLITY

The economy was already teetering when the tech bubble started to go bust in March 2000. But the conspicuous consumption didn't change until the deadly attacks that leveled the World Trade Center and badly damaged the Pentagon.

``It has been a very sharp reality check,'' said Candace Corlett, partner at New York's WSL Strategic Retail consultants. ``People had this great feeling of being rich when their stocks were doing well. They're not feeling rich anymore, far from it.''

The result? Shoppers have turned to less pricey, more practical retailers, known in the industry as ``bridge lines'' -- halfway between wholesale and luxury.

Instead of buying a Prada handbag for $900, many high-brow consumers are opting for a $250 bag from Coach .

``People are thinking, 'I can have quality fashion without spending heaps of money','' Corlett said, adding shops like Coach Inc, Ann Taylor or Club Monaco were most likely to cash in from this shift.

The same is true in home furnishings, where she said Bed Bath & Beyond Inc., Crate & Barrel and the Pottery Barn are reeling in profits at the potential expense of higher-end shops like Armani Casa or Ralph Lauren Home.

In some corners, however, the high end is booming.

Multi-million-dollar New York homes and condos are selling like hot cakes, Davidowitz said.

Sales of high-end Jaguar and Land Rovers vehicles rocketed in March, Ford Motor Co. said. Jaguar sales shot up 86.7 percent after the introduction of a new ``X-type'' model, while overall car sales fell slightly.

Top-line dishwashers, ovens and refrigerators also exceeded sales targets at Whirlpool Corp. this winter.

Some analysts said the rich are buying homes or cars as an alternative to investing in the more volatile stock and bonds markets. But others blamed the shift in tastes on a consumer preference for higher-quality goods and away from the frivolous purchases of the past -- a shift in attitudes, not economics.

``In the 90's consumers bought flashy, gaudy looks which went out of style quickly, and less attention was paid to how the product worked or stood the test of time,''said Mintel International Group analyst Bryan Roberts in a recent report.

``Now retailers are seeing more investing in traditional products that will become future heirlooms, and buyers are more interested in quality names.''

LUXURY SECTOR TONES ITSELF DOWN

Luxury goods makers have changed their tack to woo back their rattled customers, said marketing professor Bernd Schmitt of the Columbia Business School.

``Any sort of negative or weird sort of imagery is gone,'' Schmitt said, citing a slick, high-tech LVMH advertising campaign which was replaced by softer, more playful images.

``In a way we are back to where luxury originally came from. The focus is on personal, one-to-one treatment.''

Wall Street analysts were mixed over whether an expected economic recovery would salvage luxury goods sales this year.

Merrill Lynch and Goldman Sachs have cited early stages of improving sales across the luxury sector. They both upgraded their investor ratings of Neiman Marcus last week.

But Morgan Stanley Dean Witter has remained downbeat on the sector on doubts consumers will to buy branded products in the current economic and social climate.

One fashion consultant said the luxury sector needed to tone itself down to attract customers.

``The trend now is toward more romantic, classic and tailored designs,'' said Pat Tunsky, creative director of the Doneger Group fashion consultants. ``What's gone out of fashion is anything that's too glitzy or over-the-top,'' she said.

``A status symbol will always be desirable. There is still a glitzy Fendi bag to be had out there, and the very, very rich will still want to buy it.''