Insight: Luxury brands position for U.S. boom

Fri May 24, 2013 10:10am EDT
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By Astrid Wendlandt and Phil Wahba

PARIS/NEW YORK (Reuters) - Most men might balk at spending $600 on a pair of Dior sneakers but for U.S. shoppers like Ephraim, an upbeat 30-year-old, such indulgences are becoming increasingly commonplace.

Ephraim is the kind of man who gives luxury goods makers high hopes that the U.S. market can fuel future growth, as China runs out of steam and demand in Europe sags.

"There is a cultural shift," Ephraim says while browsing at Saks Inc's New York City flagship. "Men are becoming more fashion forward."

The growing appeal of luxury goods to men and increased confidence among affluent spenders as the U.S. economy and asset prices recover have boosted sales and encouraged luxury brands to step up their investments in the United States.

More foreign shoppers are also thronging stores as the U.S. government eases visa restrictions to attract more tourists.

Luxury spending in the United States collapsed after the 2008 financial crisis but roared back to pre-crisis levels by 2012. Last year, the world's No.1 and No.3 luxury groups LVMH (LVMH.PA: Quote) and PPR (PRTP.PA: Quote) saw higher growth rates in the United States than in China for the first time in years.

Sales in the Americas are expected to grow 5-7 percent this year, compared to 6-8 percent in mainland China and 0-2 percent in Europe, according to consultancy Bain & Co.

Evidence is already showing through. Ralph Lauren this week forecast U.S. sales growth of 4-7 percent while high-end department store Saks SKS.N reported quarterly sales up 5.9 percent, almost double what analysts had forecast.   Continued...

A woman enters high-end retail store Bergdorf Goodman along 5th Avenue in New York May 19, 2013. REUTERS/Eric Thayer