Where Cautious Consumers Are Causing Chaos

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The firm's clubs lost 9,000 members in three months, to a total of 510,000. Executives said they expected earnings and membership to continue falling in 2009.

Luxury Goods: Not So Swell

Wealthy, upscale, urban consumers are slashing spending, and the best evidence may be trends among luxury-goods retailers. Their globetrotting customers are staying home and spending less, according to analyst Rey Wium, who tracks the world luxury industry at Afrifocus Securities, based in South Africa. World air travel is a good gauge of luxury spending, Wium argues. International passenger movements rose 5.9% in the first half of 2008, while luxury-goods sales rose 12%. In the last quarter of 2008, travel fell 4.3% and sales dropped 8%.

Wium predicts luxury-goods sales could fall 10.6% in 2009.

Such prospects are reflected in investors' opinion of retailers like Saks (SKS). Shares in the high-end department store have fallen 87% in the past year, making it one of the worst large-cap stocks in the U.S. On Mar. 10, Standard & Poor's Ratings Services lowered Saks' credit rating from B to B-. It cited "steep declines in same-store sales and heavy markdowns of goods."

February retail sales data, set to be released Mar. 12, will give a full picture of U.S. spending trends. But, several months into a severe cutback in spending, it's clear that consumers are cutting out many of their higher-end, more sophisticated spending habits—whether that is urban health clubs, expensive apparel, or quality vodka.

Firms hurt by this trend are many of the same firms that benefited from the boom years, when wealthy and upper-middle-class consumers were spending freely. From mid-2004 through 2007, shares of Saks rose 42.5%, Brown-Forman stock rose 58%, and Life Time shares jumped 131%.

Now these firms must follow their consumers downscale, offering discounts and aggressive marketing campaigns to keep their once-reliable customers spending. Maybe it's time to dust off the old "Luxury you can afford" slogan as a new generation tries to live large for less.

Steverman is a reporter for BusinessWeek's Investing channel.