Sales of luxury goods up after recession

Baltimore residential real estate broker Bonnie Fleck is no stranger to luxury.

"I think it might be because my very first car was an Audi," Fleck said when asked why she chooses luxury cars instead of more utilitarian models. She also wants to give clients a comfortable ride as they drive from home to home, so she leases a new high-end car every few years.


On Thursday, she picked up a black sedan at Lexus of Towson, which sold 208 vehicles last month — 60 more than May 2011, said Mike Meagher, the dealership's general manager. It was the outlet's best May ever, he said.

The dealership's success is not isolated, financial analysts say. Nationwide, department stores such as Saks Fifth Avenue and Nordstrom have had robust growth over the past year. And in the Baltimore area, upscale stores are opening in Harbor East and Towson Town Center — moves that analysts see as a potential turning point for retail in the Baltimore area, where high-end shopping has long been scarce.


"Overall, U.S. spending on luxury goods is growing at a higher rate than overall retail spending," said Michael McNamara, vice president of research and analysis for MasterCard SpendingPulse, which estimates total U.S. retail sales across all payment forms, including cash and check. Its luxury spending index has recorded 20 straight months of year-over-year growth.

Though sales for luxury items — from diamond rings to well-appointed SUVs — continue to grow, erratic financial markets and a deepening European debt crisis have caused that growth to slow recently, raising the question of weather luxury retail will continue to flourish this year.

"We think it's another summer of pressure on higher-income sentiment," said David Schick, an analyst at Stifel Nicolaus in Baltimore who tracks luxury retailers, including Tiffany and Coach. "It gets complicated in election years about how people feel around spending and tax rates."

In fiscal year 2011, the average monthly sales growth for luxury retailers was 7.9 percent, according to the International Council of Shopping Centers. So far this fiscal year, the average monthly increase has been 7.7 percent.

Saks Fifth Avenue's sales grew 9.5 percent in fiscal 2011 and 4.6 percent in the first four months of this fiscal year, said company spokeswoman Julia Bentley. Department store companies typically begin their fiscal years in February, after the holiday season.

During fiscal 2011, Nordstrom had $10.5 billion in sales — a record for the store's 111-year history, said company spokesman Colin Johnson. Nordstrom has had 10 consecutive quarters of same-store sales increases, he said.

Continued sales growth among high-end brands helps explain why six retailers are moving into the luxury wing of Towson Town Center. It is the largest influx of stores since the wing opened four years ago.

Upscale cookware store Sur La Table, resort-wear clothier Lilly Pulitzer, game and puzzle retailer Marbles: The Brain Store and personal care outlet L'Occitane all plan to open in August, the mall said Wednesday. The women's apparel shop White House/Black Market will relocate from another part of the mall to the luxury wing in September. The name of the sixth store has not been announced.

Nationally, luxury retailers have been "hitting it out of the park" and that has been reflected in their real estate moves, said Howard Davidowitz of Davidowitz & Associates Inc., a retail consulting and investment banking firm based in New York.

"The large shopping centers that tend to attract luxury stores are doing much better" than outlets with anchors such as Sears and J.C. Penney, he said.

Locally, Towson Town Center has had success attracting high-end stores in part because the owner, General Growth Properties, manages many shopping centers and can work out leasing deals across several outlets, said Rene F. Daniel, a principal with commercial real estate brokerage Trout Daniel & Associates in Baltimore.

General Growth has 135 malls nationwide, including Mondawmin Mall in Northwest Baltimore and Harborplace and The Gallery at the Inner Harbor. Along with Towson Town Center, its luxury malls include Tysons Galleria in Northern Virginia, Glendale Galleria in Los Angeles and Water Tower Place in Chicago.


Leveraging multiple markets gives malls such as Towson Town Center an advantage over smaller shopping center companies and downtown rentals that are run by local companies, Daniel said. Harbor East, for instance, might have more difficulty drawing luxury brands because the buildings' owners do not offer a national presence, he said.

Apparel stores Anthropologie and J. Crew, MAC Cosmetics and upscale athletic wear shop Lululemon Athletica have said they plan to open by summer's end at Harbor East.

"I'm cautiously optimistic that this could be the change, the turning point for high-end retail in Baltimore," said Geoffrey L. Mackler, a vice president with H&R Retail, a commercial real estate firm that specializes in retail.

Baltimoreans traditionally do their luxury shopping in Washington, New York or Philadelphia — largely out of habit, he said. People from Baltimore also have a tendency to take pride in their thrift, he said, a trait that might have put off high-end retail.

The Baltimore area has not been kind to high-end retailers, said Mark Millman, CEO of the retail executive hiring firm Millman Search Group in Owings Mills. As evidence, he cites the short-lived Saks Fifth Avenue at Owings Mills Mall, which opened in 1986 and closed within a decade, and the Philadelphia retailer Nan Duskin, which lasted at Cross Keys for only the first half of the 1990s.

"Both of those stores failed miserably, and Baltimoreans did not support them," Millman said.

Those disappointments probably deterred upscale expansion, said Millman, who is hesitant to mark the Towson Town Center announcement as a sign of things to come. "I'd be very interested to see what their lease terms are," he said.

Washington suburbs such as Bethesda and Tysons Corner, Va., have had more luxury retail growth because they serve a bigger population center with a higher concentration of wealth, said Richard Clinch, director of economic development at the University of Baltimore's Jacob France Institute.

But upper-tier retailers have become a lot less picky about where they set up shop, he said. Retailers who used to reject any location other than the top markets are now willing to move in if there's a potential for profit.

Baltimore economist Anirban Basu notes that while luxury retail remains a highlight of the U.S. economy, one sector is doing even better: discount chains.

In May, discount stores were at the top of the list for year-over-year chain store growth, according to the International Council of Shopping Centers.

"What it reflects is the ongoing bifurcation of the economy between the haves and the have-nots," said Basu, head of the Sage Policy Group, a firm that consults on Mid-Atlantic economic and policy issues. "There is a group of Americans working to stretch every dollar. ... Then there's another group that seems to be doing quite well."


At the Dollar General in Pigtown on Wednesday evening, Nikki Williams was carrying a jar of spaghetti sauce and preparing to walk home for dinner. "Trash bags, pillows. You can buy curtains — everything," she said.


Without hesitation, she offered the main reason she shops there: "Because it's cheap."


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