June 13, 2024

Forget Austin and Miami. In the US, fashion’s new hotspots are Dallas and Orlando.

The tech millionaires and crypto bros who flocked to chic, warm-weather cities during the pandemic — and then spent big on Gucci and Dior — are laying low now that some of the air has gone out of their respective asset classes.

Bal Harbour is still seeing plenty of store openings, but it’s the suburbs that now have the most coveted retail real estate, according to CBRE, a brokerage: about 4.65 percent of suburban retail properties were available to lease in the second quarter of 2023, compared to 5.15 percent for urban properties.

What American consumers are buying is also changing. As a whole, they’re still spending. Retail sales rose 0.2 percent in June and 1.5 percent from a year earlier, according to US Census Bureau data released Tuesday, marking the third straight month of growth (in Europe, May retail sales were flat month-over-month and down 2.9 percent compared to the previous year).

However, luxury has lost steam. Kering, which owns Gucci and Balenciaga, among other brands, saw sales in the US drop 18 percent in its first quarter. That’s compared to an 80 percent gain between 2019 and 2022.

Luxury’s challenges are partly due to the fact that “aspirational” shoppers have been priced out by their repeated price hikes. Many of the customers who accounted for luxury’s dramatic growth are in tech and finance, two industries that have faced sweeping job cuts, even as the economy as a whole remains close to full employment.

This so-called “richcession” has been a boon to brands a notch (or a few notches) lower on the pricing ladder. Other categories such as menswear and athletic wear are also thriving, according to Eric Fisch, national sector head of retail and apparel at HSBC’s corporate banking division. Even as US sales have slumped at Gucci and Cartier, contemporary brands have continued to see strong business, as have activewear sellers like Lululemon and fast-fashion retailers such as Mango.

“I see a lot of pockets of weakness but some areas are really strong,” said Fisch. “It’s really category-by-category and just a function of different parts of the economy not all moving at the same pace.”

Brands like Scanlan Theodore, an Australian womenswear label, still see the US as the best opportunity for growth. It opened new locations in Long Island, Dallas, Washington DC in the past year, and is projecting a 35 percent rise in sales this year, compared to 2022, according to its US chief Melinda Robertson.

“We’ve noticed the American consumer spending and spending and spending,” said Georgiana Huddart, cofounder and creative director of UK-based premium swimwear brand Hunza G, which is exploring pop-ups in New York, Los Angeles and Dallas, among other cities.

The Hottest Markets

Florida and Texas — and the American South at large — remain top destinations for people looking to move. Between 2021 and 2022, The Villages area in Florida, a sprawling retirement community north of Orlando, was the fastest-growing US metropolitan area, while the Dallas-Fort Worth-Arlington region in Texas had the highest numeric increase in population, according to the Census. Six of the 15 fastest growing cities in that same period are in Texas.

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For a time, brands were intent on chasing wealthy transplants in downtown Miami, or in Austin’s luxury retail developments. But at the tail end of 2022, retail availability in suburban markets dipped below that of urban markets for the first time in at least a decade, and has continued to outpace urban areas in terms of demand, CBRE data shows.

“It’s the tertiary markets, or areas with less than 1 million people, where there is the most unmet expansion needs,” said Brandon Isner, head of retail research for the Americas at CBRE.

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Belgian designer Meryll Rogge, for instance, sees Florida and Texas as key locations for her brand’s US expansion. While the label won’t be opening its own retail locations, it plans to build out relationships with local retailers and pursue events there, she said.

LA-based womenswear brand Simkhai will open a store in Dallas and Orange County, which contains wealthy Los Angeles suburbs. UK-based men’s resort wear brand Orlebar Brown, meanwhile, is looking to open five new US stores in the next year, including a location in Orange County and another in Boca Raton, Florida. Brick-and-mortar in general continues to be attractive: retail leases hit the lowest rate of availability in 15 years in the second quarter of 2023, according to CBRE.

“There are certain pockets where the consumer is still spending,” said Jonathan Simkhai. “It’s not the crazy gangbusters that a lot of fashion brands saw in 2021 but [growth] is steady.”

Peak Luxury

A recent Wall Street Journal report found that unemployment benefits collected by US households earning $125,000 a year or more were up 40 percent in April compared to the year prior, an increase five times that of households making less than $50,000.

Those recently unemployed bankers and software engineers weren’t dropping tens of thousands of dollars in a single visit to Louis Vuitton or Chanel. But collectively they drove a major portion of luxury’s growth since the pandemic, one handbag, belt and pair of shoes at a time.

Those shoppers are sorely missed. Most luxury stocks fell sharply this week after Cartier-owner Richemont reported Tuesday that its revenue in the Americas dipped 4 percent in the quarter ending June 30.

Some accessible luxury brands, meanwhile, are seeing a windfall as aspirational shoppers trade down.

“I wouldn’t be surprised if the perceived value of contemporary has increased in the mind of the luxury consumer,” Fisch said.

A Promising Outlook

Investors and brands may be worried about luxury’s trajectory, but they’re less concerned about the future of the US economy as a whole. Inflation seems to be under control: prices rose by 3 percent in June, the lowest rate of growth in two years. Unemployment remains at historic lows. Consumer confidence, meanwhile, rose to a 17-month high in June, according to the Conference Board.

They also have few other places to go. Europe is still fighting high inflation and is experiencing weaker growth (Germany entered a recession earlier this year). China’s economic growth slowed in the second quarter, when it should have been in the midst of a post-lockdown rebound.

“There’s insane spending going on in the Middle East, with new developments in Saudi Arabia or Qatar,” said Trevor Hardy, chief marketing officer at Orlebar Brown. “But if I had to pick a country, America is where we will be investing the most resources opening new stores.”


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