Last week, luxury retailers reported struggles related to slowing demand for high-end goods. Don’t forget to subscribe to the Glossy Podcast for interviews with fashion industry leaders and Week in Review episodes, and the Glossy Beauty Podcast for interviews from the beauty industry. –Danny Parisi, sr. fashion reporter
Luxury retail struggles
Neiman Marcus is the latest luxury retailer to announce slumping sales. The company announced on Wednesday that both its revenue and its profitability were hit in the last quarter. Its earnings were around $95 million, compared to $112 million in the same period last year. And it ended the quarter with $35 million in cash, compared to $194 million in the same period last year.
On the Week in Review podcast last week, Zofia Zwieglinska and I discussed the crisis period that luxury retailers are in. Saks Fifth Avenue is reportedly struggling to pay its vendors on time, Gucci has sued multiple retail partners for selling counterfeit goods, and retailers including Neiman Marcus are feeling the brunt of the decline in luxury sales. It begs the question of whether luxury brands will soon be taking a long look at their DTC options in an effort to divest themselves from the retailers that are struggling.
One retailer that has managed to buck this trend is Nordstrom, which reported last week that it tipped over into profitable status in the last quarter. While its sales were down by almost 7% last quarter, thanks to cost-cutting, the company jumped from a loss of $20 million in the third quarter last year to a profit of $67 million this year — a significant increase.
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But even here, it’s not luxury that’s pushing the growth. Executives speaking on Nordstrom’s earnings call made it clear that Nordstrom Rack, its off-price business, was the key growth driver last quarter.
“We see a lot of opportunity to add profitable new Rack stores. We are getting really great returns on those investments,” CEO Erik Nordstrom said on the earnings call.
Gucci disappoints at auction
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Speaking of luxury slowdowns, we saw yet another example of wealthy shoppers reining in their spending last week. Christie’s, which is owned by the Pinault family who also owns Kering, hosted an auction of rare Gucci handbags. And contrary to the way these things have typically gone, the bags underperformed.
One bag, a black leather Bamboo bag that was expected sell for over $200,000 ended up selling for around $150,000. It shows that the intense demand for luxury goods and limitless price ceilings of recent years have come to an end. It’s also a sign that Gucci and its parent company, Kering, are struggling to maintain the dominance the brand has held for years, in the wake of the slowdown.
