By Phil Wahba
(Reuters) - Affluent shoppers shrugged off anxiety about the global economy that cast a pall over the luxury sector in the spring, leading Estee Lauder, Michael Kors and Saks to issue bullish sales forecasts.
Consumers showed a willingness to pay for high-end handbags and designer gowns and anti-aging creams despite fears earlier this year that rocky stock markets and worries about the euro zone financial crisis and the global economy would dampen luxury spending.
"We have not seen any change in traffic in the full price channel," Michael Kors Holdings Ltd
Kors raised its full-year sales and profit forecast and said it expects same-store sales, a key retail measure, to rise 30 percent.
Kors and Saks Inc
At the same time, consumers continued to travel, snapping up Estee Lauder Cos Inc's
More broadly, the government reported U.S. retail sales increased in July for the first time in four months as demand rose broadly for everything from cars to electronics. That signaled consumers could drive faster growth in the third quarter.
Kors shares rose about 15 percent to $48.66, while Estee Lauder jumped 10 percent rose to $60.50. Saks was up 5.8 percent at $11.48.
'AFFORDABLE LUXURY'
Kors' better-than-expected profit was due in part to the expansion of its boutiques within department stores at a time when chains like Saks, Neiman Marcus Group and Nordstrom Inc
Kors has benefited from a consumer appetite for "affordable luxury" and its founder's prominent role as a judge on the popular television reality show "Project Runway."
"Michael Kors is considered a premium brand but it has mass appeal and mass affordability. And that's part of the secret. They have a luxury halo but also have affordable price points," said Milton Pedraza, chief executive of research and consulting firm Luxury Institute.
Kors, whose competitors include Coach Inc
Lauder saw gains in every product category and geographic region, including high-single-digit percentage growth in sales to North American department stores.
Outside the United States, shoppers showed more appetite for luxury.
Lauder reported strong sales in China, the world's fastest growing luxury market, despite the company's warnings in May that the key market was cooling off, as well as in Europe.
Similarly, Kors, which gets 90 percent of its sales in North America but is expanding overseas, said European revenues soared.
Saks maintained its forecast for same-store sales to rise in the mid-single-digit range in the second half despite an "uncertain" economy. The upscale chain's gross margin fell less than expected in the latest quarter on reduced discounting.
Outside of department stores, other companies are also going upscale. Gap Inc's
Rodriguez's own collections include sweaters and pants priced at over $700 each, and $2,195 boots sold by Barneys, as well as $100 perfumes sold by Nordstrom.
TRAVEL BUMP
Both Kors and Lauder reported strong sales to travelers on the heels of high-end luggage maker Tumi Holdings Inc
Kors' CEO Idol said sales to tourists had spiked in the last two months, while Lauder said its sales were particularly strong in travel retail and emerging markets.
Still, others warn that shoppers remained cautious. Ralph Lauren Corp
(Writing by Jessica Wohl reporting by Phil Wahba in New York; additional reporting by Jessica Wohl in Chicago; editing by John Wallace and Jeffrey Benkoe)
