Ultra-rich shoppers wield perverse economic aegis
Technology
Ultra-rich shoppers wield perverse economic aegis
NEW YORK (Reuters Breakingviews) - Champagne keeps flowing as beer refills slow. Ritzy brands are expressing more confidence and pricing power than Main Street counterparts grappling with tariffs and anxious shoppers. This divergence suggests that the ultra-rich could buttress an economic slump, at least for a while, but also betrays a shaky system.
The chart shows the price return for the Stoxx Europe Luxury 10, the S&P 500 and the FTSE All-World Consumer Discretionary indices since 2016.
This pattern extends beyond fashion and autos. Posh hotels have generated 6% more revenue, per room this year, while other lodging suffered declines, according to hospitality research outfit STR. At $7 billion Life Time, whose upscale gym memberships start at $200 monthly, the company’s share price is up 85% since its initial public offering in October 2021. Over the same span, the $8 billion discount chain Planet Fitness’ (PLNT.N), gained just 28%.
Such examples also reflect a widening divide. The top 10% of American earners increased their spending 58% in the four years through September 2024, Moody’s Analytics found. Consumption growth from everyone else barely outpaced 21% inflation recorded over the period.
Elite purchasing power is expanding, too, with the top decile’s net worth up 40%, or more than $30 trillion, from 2019 through 2024, U.S. Federal Reserve data shows. More pointedly, UBS research shows that the richest 1.5% of the population holds $214 trillion, or about half, of the world’s lucre, while the bottom 40% claims just $2.4 trillion.
It’s no wonder mass-market retailers from Target (TGT.N), to Macy’s (M.N), say shoppers are already trading down for cheaper goods. Higher tariffs threaten to accelerate the trend, raising costs for consumers just scraping by. The danger is that economies leaning so heavily on their wealthiest are not only unequal, but also unsustainable.
Upscale fitness chain Life Time said on May 8 that it roughly tripled its first-quarter net profit to $76 million from a year earlier on an 18% increase in revenue, thanks to higher average membership fees and more spending at the gyms.
Discount rival Planet Fitness on May 8 reported a 20% rise in net income during the first three months of the year, to $42 million, on a 6% gain in revenue at clubs open at least a year, crediting its marketing campaign.
