Retail in the Recession

Most retail firms were hard hit by the economic recession. This is mainly because consumers became extremely cautious about how they were spending their money, and curved their spending habits. For example, Amazon, which was on a upward growth since it started to turn profit in 2003, stunned everyone with a remarkable increase in profits in times of recession. High street shops may have been struggling to make ends meet during the recession, but online retailer Amazon is still going strong. According to NetAdvantage, during the 2008-2009 recession Amazon revenue increased, although it was not such a big profit as Amazon usually had, they didn't experience losses. The American company stunned Wall Street analysts by recording profits of $199m for the last three months - a jump of 68% on the same period last year. Sales, meanwhile, rose by more than a quarter to $5.45bn. Estimates had suggested that the Seattle-based company was due to rake in around $5bn in sales for the period ending on September 30.Amazon was particularly buoyed by the success of its Kindle electronic book reader, which founder Jeff Bezos said was now a mainstay of the Seattle-based company's strategy.

LVMH, is the world’s largest luxury-goods group, for decades LVMH’s formula has worked like a spell: seduced by beautiful status-symbols, perfect shops and clever advertising, millions of people have swooned forgetfully towards the firm’s cash registers. At Louis Vuitton, LVMH’s star company, the model’s pricing power has yielded consistent profit margins of around 40-45%, the highest of any luxury-goods brand. During recessions customers found it far harder to forget about price. The seriously rich, of course, still spent freely. But much of the industry’s rapid growth in the past decade came from middle-class people, often buying on credit or on the back of rising house prices. In the first half of 2009 the group’s revenues were about the same as a year before, though profits were 12% lower. Two divisions—wine and spirits, and watches and jewelry—were the worst affected: their revenues each fell by 17% and their profits by 41% and 73% respectively (see chart 2). The falls were offset by Vuitton, where revenue rose by a double-digit percentage, registering gains in every market. “It is incredible that in a downturn the consumer still buys so many Louis Vuitton bags, but she or he does,” says Melanie Flouquet, luxury-goods analyst at JPMorgan in Paris.

The largest apparel maker in the world by revenue, VF continued to add new retail stores and plans to snap up new brands in order to survive the recession. VF Corp experienced losses in revenue after the 2008-2009 recession. When Mr. Wiseman, formerly the company's chief operating officer, became chief executive of VF in January of 2008, the economy was still sailing on a consumer spending boom. But nine months into his new role, the boom was over. VF's earnings slipped almost 30%, to $115.9 million, in the critical fourth quarter. For the full year, operating income fell for the first time since 2000. They have since bounced back in 2010 due to their strategy, the company went on an acquisition spree, snapping up a dozen new "lifestyle" brands, such as outdoorsy label Napapijri, surfer brand Reef, and women's yoga-inspired active wear brand Lucy. "We know the challenges of the upscale department stores," said Mr. Wiseman. Nevertheless, he defends his strategy, arguing that, for now, VF can capture consumers at lower- and mid-tier retailers, but "when they shift back up to luxury we can catch them there as well." Mr. Wiseman said that the company is keeping a close eye on its balance sheet, which had $382 million in cash at the end of last year, and a $1.3 billion letter of credit. VF has no long-term debt coming due until the fall of 2010.