May 12, 2011
MasterCard SpendingPulse has released its spending reports for April 2011 which indicate a 9.6 percent luxury spend increase year-over-year that can be partly attributed to Easter sales.
Similar to March’s numbers, SpendingPulse’s research showed that gas prices make up a significant amount of retail sales and therefore increased ecommerce sales. Indeed, April has seen increases in apparel, footwear, ecommerce and electronics, as well as luxury.
“Luxury spending has continued to build on the momentum of the past few months, posting very strong growth rates as of April,” said Kamalesh Rao, chief author of this report and director of economic research for MasterCard Advisors SpendingPulse, Purchase, NY. “This is not only reflected in the SpendingPulse luxury index, but in other areas of discretionary spending such hotels and consumer airline travel.
“March 2011 also posted solid growth rates, but not as strong as April,” he said. “There was a calendar shift that brought much of the Easter Holiday spending into April.
“That said, March and April taken together represent a solid increase over March and April of 2010,” he said.
SpendingPulse estimates for total United States retail sales across all payment forms including cash and check. It is not a reflection of MasterCard financial performance.
Healthy pulse
The SpendingPulse luxury index, excluding jewelry, was up 9.6 percent. It measures luxury sales at high-end restaurants, food stores, department stores and general apparel categories, per the study.
This is the sector’s largest gain since May 2010.
Total apparel sales in the United States were up 10.4 percent in April, which is its ninth consecutive year-over-year gain.
As Easter was relatively late this year compared to last year, some of this performance may be attributed to the holiday.
Subsections of apparel all increased as well, including family apparel at 10.6 percent, menswear at 12.4 percent and womenswear at 7.4 percent.
March’s numbers recorded a drop in women’s footwear, which supported the theory that high gas prices and therefore less foot traffic were the reason that consumers were more likely to buy online during that month (see story).
However, footwear increased 6.3 percent in April.
Despite this gain, ecommerce spend jumped again to 19.2 percent year-over-year, the category’s sixth straight double-digit growth month.
Womenswear crossed the 15 percent increase mark for online shopping while footwear topped 20 percent.
Electronics online sales recorded 9.1 percent gains, its eighth straight month for positive numbers. However, the overall category declined 1.8 percent year-over-year.
Bane of issues
There have been quite a few studies and other research as of late that have proved luxury spending is on the rise.
For instance, experts have predicted a possible $275 billion spend on luxury goods in 2011, an 8 percent growth from last year’s $255 billion, according to a new study from Bain & Co. (see story).
Furthermore, despite the recent economic crisis, luxury retail spending has gained momentum as affluent U.S. consumers continue to regain confidence, according to a survey from American Express Publishing and Harrison Group (see story).
Nonetheless, experts are not so sure that the U.S. is out of the woods yet.
It is hard to point to exactly what is sustaining retail sales since there are no early year-to-year comparisons helping to drive headline numbers, per Mr. Rao.
In fact, the lack of these types of numbers makes it hard to draw parallels to pre-recession numbers from 2005 or 2006.
“It’s best to approach these latest, albeit positive, results with some caution,” Mr. Rao said. “[Lack of comparable numbers] suggests that the current rate of retail expansion could be vulnerable, especially given the weight of higher fuel costs on discretionary spending growth.
“This uncertainty could, of course, be offset by a additional momentum in the labor market, such as we have seen these past couple of months,” he said.
Final Take
Rachel Lamb, editorial assistant on Luxury Daily, New York
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