U.S. Luxury Goods Sector Continues to Power Ahead

Although much of the U.S. retail sector may be feeling the pinch as consumers cut back due to high gas prices and weak growth in the jobs market, one sector of the retail trade is continuing to power ahead – the luxury goods market.

The evidence seems to indicate that luxury goods buyers are not affected by the uneven economic recovery and sharp rise in energy prices and are not only not cutting back, but buying more and more.

Last week, high-end retailer Harry Winston reported a strong rise in second quarter sales and profits. Its U.S. salon sales increased across a range of products with sales of jewelry costing more than $100,000 being particularly strong due to the continued strength of the U.S. luxury retail market.

Meanwhile, Signet Group, the world's largest specialty retail jeweler, announced first half pre-tax profits rose 14 percent over the same period of 2003. In addition, Neiman Marcus Groups reported that profits were up three-fold in its fiscal fourth-quarter while handbag retailer Coach raised its profits guidance.

Those results were in stark contrast to those reported by chains targeting the middle and lower-income sectors, such as Wal-Mart, May Department Stores and Kohl's.

Those sections of the market are faring much less well since they are not the people benefiting from tax cuts, while a proportionately larger part of their incomes is spent on rising energy prices and higher costs for food, household items and medical services.

Analysts see the trend continuing, at least for the rest of this year, with the luxury end of the market booming and the middle and lower sectors continuing to spend cautiously.