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Published: Wednesday, 5/19/2010

Retailers setting stage for return of spending

ASSOCIATED PRESS

NEW YORK - Retailers are priming for a sales comeback.

Shoppers have started to show they're willing and able to spend more, and stores are tweaking merchandise to accommodate them.

Cashmere is being snapped up, and sellers of goods ranging from wine to toys are reporting that shoppers are moving away from the very lowest price ranges.

The moves signal optimism that the recovery from the recession is picking up steam, but there's a downside for shoppers: the return of higher prices.

Toys R Us, which carved out sections in stores to sell toys under $3 during the downturn, is now throwing in $5 toys. Home-improvement chain Lowe's Cos. has tweaked its spring advertising to focus less on low prices and more on its sales staff's experience.

Meanwhile, HSN Inc. is back to showcasing $250 Wolfgang Puck cookware sets and pushing more gold jewelry instead of silver.

Luxury stores are prominently displaying $1,500 python-skin shoes instead of the $700 patent leather highlighted during the recession, said Robert Burke, a New York luxury consultant.

The steps are moderate because retail decision-makers emphasize they still think consumers will keep many frugal habits amid high unemployment.

But stores don't want to get caught flat-footed in the recovery.

The latest batch of first-quarter earnings reports from Macy's Inc., Nordstrom Inc., J.C. Penney, and Kohl's Corp. all showed consumers' willingness to spend more on a variety of items, but spending is still well below what it was before the recession.

For 18 months, stores cut prices and slashed inventory as shoppers focused on bare necessities. But since January, consumers have been more willing to spend on nonessentials such as denim leggings, and more people are willing to pay full price.

Coach Inc., whose handbag prices are now 12 percent lower than a year ago, told investors last month it might raise prices this year as sales of bags priced above $300 recover.



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