After the Gold Rush

They used to say that a rising tide raises all boats. But when it comes to economic floodwaters, everyone may get wet as demonstrated by the following.

From the S.F. Chronicle ("Wilkes Bashford pleads for customers," 10/16/08):

Even in tough economic times, luxury retailers usually are the last to feel the pinch. So, a plaintive letter from tony clothier Wilkes Bashford to his California customers came as somewhat of a shock.

Bashford, high-end haberdasher to the likes of ex-Mayor Willie Brown and the late columnist Herb Caen, asked 18,000 of his customers "to continue to shop with confidence."

"In 42 years of business, the current situation is unique, hence the purpose of my corresponding with you. I am taking this unorthodox approach because we need your support," read his letter, sent Friday.

Retail consultant Ellen Magnin Newman, granddaughter of department store magnate Joseph Magnin and daughter of his heir, Cyril Magnin, received one of Bashford's letters. She was a little shocked by the direct appeal.

Newman said she still sees plenty of shopping bags in and around Union Square, which has become home to a number of ritzy retailers, including Prada, Barneys, Tory Burch and DeBeers. But she described sales at many retailers as "spotty" or inconsistent and said consumers clearly are being more careful with their dollars.

"They're thinking twice," she said. "I could even be guilty of that myself, but I won't stop buying what I need."

With the economy in a tailspin, even members of the well-heeled crowd have taken a look at their stock portfolios and decided to forego the latest Prada or Louis Vuitton handbag. Cutbacks in discretionary spending are an early barometer of recessionary times.

"From a consumer demand standpoint, everyone at every level has pulled back and stopped discretionary spending," said Helen Bulwik of New Market Solutions, an Oakland retail consultancy. "That has a great deal to do with the gloom and doom that's out there."

Indeed, it was partly Wednesday's release of the U.S. Commerce Department's dismal September retail sales report that drove the Dow down more than 700 points, underscoring how jittery Americans are about the current economic crisis.

The report showed a 1.5 percent sales drop in department store sales during the back-to-school season, which is the second busiest time for retailers after the December holidays. Sales at electronics and appliance stores were down 1.5 percent, but car dealers were hit the hardest with a 4.2 percent sales drop. Overall, retail sales have fallen for three consecutive months, the steepest being last month's 1.2 percent drop.

It's a troubling trend that predicts a decidedly un-jolly holiday for the nation's shopping malls and stores. "This is a crystal clear signal that the holiday season ahead is shaping up as the worst since the early 1980s," wrote Joseph Brusuelas, chief economist at Merk Investments, in response to Wednesday's weak report.

Many retailers, including luxury department stores, posted lack-luster September same store sales, or sales at stores open at least a year. At Neiman-Marcus Inc., same-store sales for the five weeks that ended on Oct. 4 plummeted 12.9 percent compared with the same period last year, a drop the company's chief executive attributed primarily to the economy.

But shopping is more than a national pastime; it's essential to the economy. Consumer spending accounts for more than two-thirds of gross domestic product, and Bashford want his customers to do their part. In his letter, the storied clothier's version of an economic stimulus package offered a $300 discount on purchases of at least $800 - an amount, he said, that's not difficult to ring up at his store.

"The best bailout plan is to go shopping," Bashford said in an interview in his office above his Sutter Street store.

[All for ADC.]