U.S. Luxury Goods Sales Soar As Economy Rebounds

The U.S. luxury goods business is making up for lost time as the economy picks up and confidence returns, encouraging big spenders back to up-market stores and ending a three-year decline in sales.

"Business is spectacular right now. We've sold more alligator shoes so far in 2004 than in 2000-2003 combined," Karen Katz, chief executive of Neiman Marcus, told Reuters.

According to a study by Italian luxury organization Altagamma, U.S. sales of up-market goods grew almost 28 percent in January-May. Although many analysts predict this growth will decline somewhat, it is, nonetheless, seen staying strong.

The luxury goods market has taken a battering since the 9/11 terror attacks on the United States and the fall in global stock markets and consumer confidence.

But with stock markets now rising, some industry watchers see strong double-digit growth in luxury goods sales this year.

The recession of the past three years has forced luxury retailers to change their tactics for attracting and retaining customers, with solid business sense, faster distribution, better customer care and more exciting products seen as helping firms weather any future shocks.

The mood of consumers could yet take a change for the worse, however, with the possibility of tax increases for wealthy Americans following the U.S. elections in November.

In addition, a new cycle of interest rate hikes, following the Fed’s decision last week to increase interest rates to 1.25 percent, could also lead to a swelling in personal debt and reduced sales, while a new wave of terror attacks could shatter confidence again.