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The Retail Recovery's Best Accessory: Higher Handbag Sales

Wednesday, 26 May 2010 | 9:45 AM ET

With women growing tired of their over-worn wardrobes and the economy slowly ticking higher, sales of fashion accessories rose 17 percent in the first quarter, after ending the year 10 percent lower in 2009, according to an industry study.

Jose Luis Pelaez Inc | Blend Images | Getty Images

But although The NPD Group research firm said the report is the start of a positive trend in discretionary spending, it doesn't mean shoppers are ready to return to a period of conspicuous consumption, said Marshal Cohen, NPD chief industry analyst.

"They're (consumers) really going to do their homework before they buy," he said. "We're going to grow slow and steady, like the tortoise."

Led by women's handbags, small leather goods and belts, the accessories category has been a "bright spot" for 2010, Cohen said. But the growth seems to be driven on lower prices, with sales of fine jewelry and high-end watches tapering off, he said.

What's more, the average amount spent on a handbag moved about 3 percent lower to $100, as the return of high-net worth shoppers wasn't enough to recover lost revenue from a decline in "aspirational" shoppers—those who will splurge on the right high-ticket item, but don't have the income of a typical luxury shopper.

Aspirational customers accounted for a large amount of luxury goods sales before the recession.

Further mitigating prices was the introduction of stratified price points from high-end companies such as Coach, analysts said.

George Whalin, president and CEO of Retail Management Consultants, said that although consumers are showing signs of strength, there are still fundamental problems with the economy—such as stubbornly high unemployment and a pullback in the stock market—that continue to spook consumers.

Wall Street Strategies analyst Brian Sozzi said he also doubts the sustainability of retail sales growth, adding the improvement in accessories may actually signal a slowdown in consumer spending.

Sozzi attributed first-quarter retail sales growth to a release in pent-up demand, saying now that shoppers have added new items to their wardrobes—and because accessories can cheaply update already-existing fashions—shoppers may take a hiatus from the mall.

He did, however, note an improvement in product from the 2006 and 2007 seasons, saying more embellished inventory could spur sales.

"There's a reason for the consumer to go out there and spend," he said.

Along with luxury leather goods company Coach, fashion-forward specialty retailers such as Guess and Ralph Lauren —which is releasing a new line of handbags in August—should also benefit from prices and assortments that hit consumers' sweet spot.

In the discount arena, analysts said Target could continue to benefit from a lack of trendy products at low-price competitor Wal-Mart , as it continues to add new designers to its accessories and women's collections. Cohen added TJX's TJMaxx to the list, while Whalin noted Gap and Nordstrom's likelihood to capitalize on fashion-savvy shoppers.

On the flip side, Sozzi said luxury watch company Movado is likely to lose out on the trend, as its timepiece products have fallen behind on innovation.

Although the accessories category is still 6 percent lower for the 12 months ending March 31, Cohen remained optimistic, saying the 90 percent of Americans who have jobs are less sensitive to economic uncertainty than in the past. What's more, consumer sentiment rose to its highest in more than two years on Tuesday.

"Any increases are certainly welcome at this point," Whalin said.

More from Consumer Nation:

Questions? Comments? Email us at consumernation@cnbc.com

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