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Quick Hits: So Long, Luxury


Brief scrutiny of today's headlines.

Sales of luxury goods are slumping, and there's no rebound just around the corner.

No crocodile tears, please. Declining sales of designer clothes, watches, shoes, sports cars and all that stuff will hurt those who make and market the goods. It also means lower sales-tax revenue for cities and states - and that means less money for schools, parks and public transportation.

Rising worldwide markets have about doubled the luxury goods market in the last 10 years, a trend brought to an abrupt end by the credit crunch and sharp market downdraft.

The fourth quarter is likely to be especially sour for luxury goods retailers due to weak holiday sales.

The US is the world's largest single luxury market, and sales are likely to fall more sharply here than they did in the last 2 recessions, says the Luxury Institute, a research group that tracks the top-of-the-line market.

The downturn in luxury goods is worldwide and also means a shrinking market for, say, designer Italian handbags and dresses in China. You can bet sales of champagne and Ferraris will take it on the chin, too.

Luxury goods makers such as Bulgari and Cartier have cooked up more affordable products lines pitched to the hoi polloi. Dolce & Gabbana developed D&G while Giorgio Armani offers Emporio Armani and Armani Jeans.

Such brands would work well when consumers are flush and wannabes can aspire to something more than Wal-Mart (WMT). But the success of second tier labels from big names is doubtful in an economy where nearly everyone is cutting back and stashing cash.

So, this probably isn't the time to go long in Luxottica Group (LUX), Coach (COH), Gucci or Tiffany (TIF).

The new snob appeal soon may include this declaration, delivered with pinky aloft: "Why yes, LL Bean is my tailor."
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