Poor scrimp as rich shop
Retailers reflect split in economy
American shoppers are splitting again: The affluent finally are starting to buy, picking up designer clothes at places like Nordstrom, while those on the lower economic rungs are still scrimping by, heading to Walmart for the basics.
Recent earnings reports from major retailers suggest that the wealthy, who pulled back their spending the hardest during the financial meltdown last fall, once again are opening their wallets and going back to higher-end outlets.
“It’s a good sign, but we don’t see the same across the board,” said Richard Hastings, a consumer strategist with Global Hunter Securities.
It’s still a far cry from the era of conspicuous consumption. No matter the tax bracket, people remain focused on value and trying to avoid overspending — whatever that might mean to them.
Luxury chains like Nordstrom and Bloomingdale’s, owned by Macy’s, say shoppers are spending again on such items as shoes and dresses, but still shopping for lower prices and classic pieces that get a lot of use.
On the other hand, discounters like Walmart are lowering prices even further to coax their less-well-off shoppers to keep spending — not on anything glamorous, buy but on such basics as food and socks.
Think of it as two different groups as the economy recovers — spenders and savers.
Luxury department stores like Nordstrom and Saks are starting to get more traffic, partly because they have rolled out some merchandise at slightly lower prices. That has helped to keep the affluent from trading down to other stores.
“If they do spend, it’s very scrutinized and it’s very value-driven,” said Robert Burke, a luxury retail analyst. “And they want items they can wear multiple places.”
Other expensive stores such as Abercrombie & Fitch are taking the lesson. The preppy clothing seller said Friday it will offer some lower-priced basics and stock up on denim early next year.
Nordstrom’s third-quarter profit rose as sales improved compared with last year. Of course, last year marked a sharp drop in luxury spending as the financial crisis deepened.
Shoppers like Patricia Murnane show what’s still changed. The 47-year-old risk manager from New York was shopping Friday for black dress slacks at a Nordstrom in Chicago.
She says she goes to more stores now to make sure of getting the best price. “I used to consider shopping entertainment, but now I don’t think it’s entertainment,” she said.
Middle-class and poorer shoppers still are clutching their wallets and focusing on basics, even as they start to venture out to stores more.
Kohl’s, a chain of midrange department stores, said more customers came into its stores in the third quarter and made more purchases, but they still are limiting their spending.
Shoppers are on a mission for a set list of items and not straying, said Kevin Mansell, Kohl’s chief executive officer.
“We’re not able to convince them to buy that extra thing,” he told the Associated Press.
Faced with slower sales, J.C. Penney Co. has cut its inventory so it doesn’t have to rely on as much discounting. Sales still were weak as its shoppers continued to worry about job security and tight credit.
Walmart continues to benefit from higher customer traffic as it aggressively discounts everything from electronics to food. But its sales at stores open at least a year slipped for the second straight quarter as shoppers spent less.
Walmart noted more pronounced swings in spending between paycheck cycles — a sign that people have little extra to spend.
That makes sense because Walmart customers who earn the least money are among the economy’s hardest-hit as unemployment tops 10 percent and gas prices edge upward, said Hastings, the consumer strategist.
“The lower-income Walmart shopper, they start to become poorer than usual, and they’ll really start to lag behind,” he said.
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