High-end market tailors itself to recession

NEW YORK The world of high fashion is coming down to earth a bit.

Trenchcoats, jumpsuits, sumptuous sweater sets and billowy dresses intended to flatter a wider range of body shapes and sizes ruled the runway at New York Fashion Week, which showcased spring 2010 designs for buyers and fashion editors.

It's a big departure from the elaborately beaded evening gowns and unwearable flights of fancy (think: see-through pants) that have dominated runways in recent years.

The everyday looks are vivid examples of how the industry is responding to a new thriftiness that has extended to the rich, who have grappled with declining net worth since last year's financial meltdown. Even mega-millionaires have re-evaluated their spending.

And while the luxury business has stabilized a bit since last fall's freefall, it's still weak.

Luxury sales fell a little more than 15 percent from January through August compared with the same period a year ago, far more than the 9 percent decline for all U.S. apparel sales, according to SpendingPulse, a data service provided by MasterCard Advisors. In past recessions, luxury sales had held up better than other areas.

After almost a decade of feeding consumers' increasingly voracious appetite for luxury goods, the fashion industry is catering to shoppers looking at clothes as investments and dressing down even for society galas.

Designers are channeling their creative energies into more practical and less expensive clothing. They are creating lower-price collections and offering more casual and multipurpose clothes, such as coats that can double as dresses.

Upscale stores such as Neiman Marcus and Saks Fifth Avenue are focusing on lowto mid-tier luxury prices, ordering less and emphasizing clothes that shoppers can wear for several seasons. That means more dresses from $400 to $600, fewer above $1,000.

Designers "want to produce clothes that are going to sell. We are seeing clothes that are well-designed but not as experimental," said Robert Burke, a New York-based luxury consultant and former fashion director at Bergdorf Goodman.

"The whole luxury business is up for grabs because people are changing their habits," said Patrick Byrne, CEO of Overstock.com, which sells Prada, Gucci and other top designer brands at big discounts. The company's internal research revealed a recent influx of wealthier customers -- those whose average household incomes were $125,000, compared with $80,000 for its core customers.

Gilbert Harrison of Financo Inc., an investment banking firm specializing in retailing, believes that luxury spending levels are reverting back to about 2004 levels. That year, sales for North and South America were about $68.2 billion, well below the 2007 peak of $85.2 billion, according to Bain & Co.

-- The Associated Press