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Retail, Luxe Sectors Battle Shock Waves From War and Sars

Goldman Sachs in London downgraded its stance on the European luxury sector due to concerns over an extended war in Iraq and the deadly SARS virus.

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Ferragamo said he had just returned from a trip to Asia and felt the presence of the "scary" pneumonia virus sweeping the region. But he said that overall, he thinks the disease poses less of a threat to the industry than the ongoing conflict in Iraq.

"Certainly at the moment, the fears in Europe and the U.S. over the war are more of a concern than the virus in Asia," he said.

But retailers and manufacturers are increasingly canceling trips to the region after the World Health Organization warned travelers to avoid affected countries in the Far East unless it was absolutely necessary to go there. The World Health Organization estimates there are now 2,223 cases of SARS in 18 countries, with at least 78 deaths from the disease.

At the mass market level, Wal-Mart acknowledged Wednesday that there has been some postponement of traveling, but no cancellations of trips, according to spokesman Tom Williams. "We are paying close attention to SARS and supplying all our associates with as much information as we receive it. If they have any question, they can contact our people at the home office. We have postponed some trips, but I wouldn’t say we canceled anything," he said. Wal-Mart associates do much importing from the Far East, where the company also operates stores. The spokesman had no details on what trips were postponed.

Terry Lundgren, president and ceo of Federated Department Stores Inc., said, "We are not traveling to Asia. We stopped a week ago, due to the flu, and won’t resume until we all get a better handle on this."

He added that personnel in Federated’s Hong Kong office have also been instructed not to travel, which primarily involves going to China.

Federated Merchandising staff does travel frequently to the Far East for importing for its private brand programs, though staff from Federated store divisions also do some traveling. As far as other parts of the world, "we’ve asked people to be very conscious of the fact of what’s going on around the world, and only take trips they believe are very important," Lundgren said. "We’re leaving the decisions in their hands, but Federated is following the government’s lead," which, he noted, is to be mindful of world events and to be prudent on travel decisions — although there have been no official government proclamations not to travel. Lundgren said that this time of year, there would be very little traveling for the divisions, though one exception would be Bloomingdale’s buyers going to Italy or France for some home furnishings.
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