bjbjLULU JEFFREY BROWN: As shoppers make their
last-minute holiday purchases, much attention is on just how much consumers will spend this
holiday season amid a weak economy. At the same time, our economics correspondent,
Paul Solman, is finding a fundamental change taking place in the world of retail. It's part of his ongoing reporting Making
Sense of financial news. WILLIAM MCCOMB, Liz Claiborne: The Kate Spade
shopper loves color and she loves sparkle. PAUL SOLMAN: CEO Bill McComb runs the Liz
Claiborne company, which owns premium brand Kate Spade. WILLIAM MCCOMB: This is a Sparkle Gia bag,
which is selling out in all of our stores right now. PAUL SOLMAN: At $95, a steal, since Kate Spade
bags can cost $500. WILLIAM MCCOMB: This is one of our classic
items. It's a quilted paneled leather with a beautiful
chain with leather inside. PAUL SOLMAN: In a limping economy, $298 shoes? WILLIAM MCCOMB: But it's not just a regular
pump. Look at the twist on the back. PAUL SOLMAN: Once a 50-brand conglomerate,
in the fall, Liz Claiborne, Inc., announced that the teetering mid-market company would
unload almost all of its divisions, including those that catered to its once core middle-income
shoppers, like the Liz Claiborne brand itself, sold to J.C. Penney. WILLIAM MCCOMB: What you're finding in the
marketplace today is that those that are chasing the value customer and those that are in effect
pursuing the high-end customer are doing the best. Those in the middle are really getting squeezed
at both ends. PAUL SOLMAN: And that's what Liz Claiborne
was. WILLIAM MCCOMB: Liz Claiborne absolutely was
focused in that middle. It became very clear, sort of a blinding clarity,
that we needed to pick a direction to go, because that middle was no man's land. PAUL SOLMAN: So, the firm went upscale and
is staking its corporate life on provisioning the posh: Kate Spade, Lucky Brand Jeans and
Juicy Couture. WILLIAM MCCOMB: Our focus on great brands
brought us to a market segment of the higher end, accessible luxury consumer. And even though the economy's bad, they're
spending money. They have disposable income to spend. PAUL SOLMAN: It should come as no surprise
to those following the economic inequality debate. Retail is increasingly bifurcated into high-end
and low, with an ever-shrinking middle, forcing do-or-die decisions on companies like Liz
Claiborne. WILLIAM MCCOMB: If we were still supporting
the 50 brands that we had, we would have had to declare bankruptcy. PAUL SOLMAN: But designer jeans are still
selling. Direct-to-consumer sales at Lucky are up 23
percent year-to-year because it has status value. WILLIAM MCCOMB: One of the staple trademarks
is the "Lucky You" label right inside the zipper. PAUL SOLMAN: Investors also seem to like the
high-end trademarks. Since the Liz Claiborne makeover, its stock
is up dramatically. Now, an upscale focus is no guarantee of future
performance. Though sales are up at Kate Spade and Lucky
Jeans, they're not at Juicy. And the company still posted a loss last quarter. But the point is, Liz Claiborne could see
clearly that the middle market had lost its luster. Luxury spending, by contrast, is on the up
and up. MILTON PEDRAZA, Luxury Institute: It's been
up since 2010 and it's been up essentially for many brands 10 percent to 15 percent in
the U.S. PAUL SOLMAN: Milton Pedraza tracks high-end consumption. MILTON PEDRAZA: There's been a flight to quality
and a flight to pedigree. So the Guccis of the world, the Louis Vuittons,
the Chanels, all the brands that we think as classic have done far better than brands
that are let's say not so pedigreed, don't have a long history, don't have classic products. PAUL SOLMAN: The well-heeled can and will
up the ante to demonstrate their prosperity in a high-low economy, it seems. And sales are climbing at high-end retailers. Saks Fifth Avenue stores are up 9 percent
year-over-year. CEO Steve Sadove on FOX Business News. STEVE SADOVE, Saks Fifth Avenue: We're seeing
very good performance in areas like handbags, shoes, accessories, jewelry. And we're seeing the best full-priced selling
we have seen in years. And, in fact, what we're seeing is the customer
going towards the more special, differentiated, best, unique products. PAUL SOLMAN: At Neiman Marcus, profits in
the most recent quarter surged 88 percent over last year. And fantasy gifts in Neiman's annual Christmas
book are selling like hotcakes, exorbitant hotcakes. A custom library for $125,000 sold -- all
five $5,000 private Johnnie Walker tasting packages, gone in two days -- 10 special edition
Ferraris with custom-made luggage to match the cars leather interior, $395,000 apiece,
snatched up in 50 minutes. But in an increasingly high-low economy, says
luxury maven Pedraza, such spending may pay off. MILTON PEDRAZA: When somebody walks into a
negotiation, and they get out of their Ferrari, Enzo Ferrari, and they may have a very high-end
watch, it isn't just showing off. It is showing off to make a point. PAUL SOLMAN: And what's the point that's being
made? MILTON PEDRAZA: That, I have power. I, mean, for example, Louboutin shoes with
the red soles, extremely conspicuous, right? And when we asked women, well, why, they said,
it shows that I have power because I can afford these products, I have made the money myself,
and I'm still feminine, and, frankly, I'm still sexy. PAUL SOLMAN: Meanwhile, unemployment and stagnant
wages continue to hammer the middle class and the middle-priced retailers who have long
catered to it. J.C. Penney, new owner of the Liz Claiborne
brand, is a current casualty of mid-income malaise, says stock analyst Anthony Chukumba. ANTHONY CHUKUMBA, BB&T Capital Markets: The
J.C. Penneys of the world, the Kohls of the world, they're struggling. I mean, in many cases, their sales are really
not growing at all and their profit margins are declining. PAUL SOLMAN: Case in point, Thanksgiving sales
began earlier than ever this year and deep discounts have continued since Thanksgiving. Layaway is back, free shipping is up, profits
down at Wal-Mart, the Gap and Best Buy, to name a few. But, as at the top, at the bottom, business
is really good. At Jack's 99 Cent Store in Midtown Manhattan,
the joint was jumping. Why? WOMAN: The prices, of course. MAN: Because of the economy and the way things
are, you have to try to watch every penny. WOMAN: My hours have been cut. I own a home and all that, so everything has
-- I have to be budgeting right now. PAUL SOLMAN: Analyst Chukumba, who's been
tracking dollar stores for 14 years, says they're benefiting from what we, among others,
have called the hourglass economy. ANTHONY CHUKUMBA: They're growing their sales. They're growing their profit margins. They're growing their earnings. And the stocks are reflecting that as well. In addition to their core low-income customers,
you have a lot of sort of middle-income customers who are trading down to the dollar stores. PAUL SOLMAN: At Dollar General, the largest
national chain, profits were up last quarter by 34 percent -- sales at Family Dollar stores
and Dollar Tree also booming. And Jack's 99 Cent Store was doing a brisk
business, too, especially for a weekday afternoon. ANTHONY CHUKUMBA: Given the time of day and
the day of the week, I'm very surprised by the amount of traffic here. And, as you can tell, it's not people browsing. These people are shopping. I see a lot of full baskets, a lot of full
shopping carts. And it's not just your person paying with
food stamps. PAUL SOLMAN: And dollar stores are investing
to serve the pinched consumer. ANTHONY CHUKUMBA: It's not like they have
just been sitting around counting their money. They have been aggressively opening stores,
renovating stores, improving the store experience, bringing in more national brands. PAUL SOLMAN: What products are popular in
stores like this? ANTHONY CHUKUMBA: They're definitely focusing
a lot more on needs, so your food items, your health and beauty care items, your household
cleaning products, and less on wants. They're catering to what the customer is buying. PAUL SOLMAN: So, then, as the holiday shopping
season enters its final few days, the retail takeaway seems pretty obvious: Aim low or
aim high, but don't mess with Mr. In-Between. urn:schemas-microsoft-com:office:smarttags
Street urn:schemas-microsoft-com:office:smarttags address urn:schemas-microsoft-com:office:smarttags
country-region urn:schemas-microsoft-com:office:smarttags place JEFFREY BROWN: As shoppers make their
last-minute holiday purchases, much attention is on just how much consumers will spend this
holiday season amid a weak economy Normal Microsoft Office Word JEFFREY BROWN: As shoppers
make their last-minute holiday purchases, much attention is on just how much consumers
will spend this holiday season amid a weak economy Title Microsoft Office Word Document
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