Luxury brands are preparing for leaner times in a variety of ways, ranging from slower expansion to outright layoffs. 

Tiffany CEO Michael Kowalski says his company would consider "modestly adjusting" its rate of new store expansions down from its goal of 12-15 annually.  Dior SA, on the other hand, may consider closing some of its U.S. boutiques in under-performing locations.

Maine-based Hinckley Co., a luxury boat builder, announced it is laying off 9% of its workforce.  The company had been meeting its sales targets until recently.  In the last 30 days, however, the company has experienced client reluctance to finalize contracts.

After aggressively buying multiple luxury brands, including champagne house Taittinger, Baccarat and Paris' Hotel de Crillon, former Starwood Hotel CEO and founder Barry Sternlicht told the Wall Street Journal he is "just waiting out the tsunami."

Even the red-hot Russian market is negatively affected.  Sanford Bernstein luxury goods analyst Luca Solca said that retail orders for Russia generated by Milan's recent fashion week were flat for the first time in five years.

Bulgari CEO Francesco Trapani told the Wall Street Journal that he's "not sure [emerging markets] are able to offset the weakness in other markets."  He predicts his company's approval rate for new Bulgari stores will fall from 50% to 10%.  Trapani said September global sales were not as strong as July and August.

PPR CEO Francois-Henri Pinault says the 65% drop in China's stock index will force consumers there to reconsider luxury purchases.  A large part of the Chinese population gambles on the stock market "like in Las Vegas." 

Meanwhile, Europe's upscale outlet mall operator Value Retail says more luxury brands are willing to sell excess inventory at their outlets, including Baccarat, Jimmy Choo and Dolce & Gabbana.

(Posted 10 October 2008)