Gird yourself for increasing closures of retail concepts that, well, seemed like good ideas at the time. Meaning, back in the bubbly go-go years when it made sense to open stores that appealed to the public's insatiable desire for luxuriant excess. This idea was underlined when I heard that Tiffany (NYSE: TIF ) is closing its Iridesse pearl jewelry concept due to the tough economic climate.
I wrote about Tiffany's launch of Iridesse way back in 2004. At the time, I observed that bling was king. Times sure have changed. I also questioned whether it was a great idea for Tiffany to shell out for a concept like this, centered on pearls, and lacking the distinctive cachet of Tiffany's brand.
According to The Wall Street Journal, Tiffany's vice president of investor relations related the company's decision to the challenging economy and said that "investing in a new retail concept is 'not a prudent use of resources in this environment,'" although I'm not sure I'd call a concept that's been around since 2004 particularly "new."
There are only 16 Iridesse stores, and from what I have been able to glean from glancing over quarterly conference calls from the last several quarters, it looks as if the chain really wasn't much of a booster to Tiffany overall. With the exception of the second quarter of 2008, when it generated a "modest" sales increase, it looks like for the most part, Iridesse sales weren't meeting the company's expectations in recent times. And back in the third quarter of 2007, Tiffany acknowledged it was tweaking product assortment and working to try to increase brand awareness and traffic to the Iridesse stores.
Of course, if Iridesse simply hasn't been making it with consumers, it's totally sensible that Tiffany should make a good escape instead of a bad stand. Consumers are becoming increasingly fickle and frugal, and many retailers will have to back away from newer concepts that just don't have the same appeal as their tried-and-true brands.
One might wonder about relatively nascent concepts like J. Crew's (NYSE: JCG ) Madewell, for example. And as an Urban Outfitters (Nasdaq: URBN ) shareholder, I'm curious how aggressive the company will be in expanding newer concepts like upscale home-and-garden center Terrain now that the economy's in the toilet.
Meanwhile, with consumers holding onto their hard-earned dollars and spending less on credit, I wonder about the viability of certain retail names altogether. For example, how well can a store like Williams-Sonoma (NYSE: WSM ) do in an environment like this? Are people really in the market for $120 teakettles these days? We'll see, but it's going to be tough for many upscale merchants.
Many ideas that seemed like good ideas at the time may be downright terrible ideas for the current climate. For the retail industry, some serious soul searching is probably in order as sales dwindle and spending goes under the microscope. Those of us who own shares in retailers need to keep alert to prudent or foolish decisions these companies make.
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