Auto dealers in Orange County could have a tough year ahead.
But it might not be as tough as this year.
The Orange County Automobile Association is forecasting an 11% drop in auto registrations for the fourth quarter resulting in a 15.5% drop for the entire year compared to 2007.
But next year, registrations are predicted to decline about 4%.
The Costa Mesa-based association of dealers’ quarterly report admits forecasting is difficult: “The confluence of events is without historical precedence, which complicates the task of forecasting county new vehicle sales.”
Factors that are keeping people away from dealerships include large household debt, falling home values and an overall decline in wealth.
Tight credit markets also are preventing some people from getting a loan.
On the upside, the report says people who are postponing auto purchases may again feel the need to buy in mid-2009.
In 2008, consumers were drawn to brands that are relatively inexpensive and known for their small cars: Kia, Volkswagen, Mini Cooper, Subaru and Hyundai.
Kia registrations were up 99% for the first nine months of this year compared to the first nine months of 2007, growing its registrations to 681.
Volkswagen also did relatively well, with 2,610 registrations, a 21% increase over 2007.
Other gainers: Mini Cooper was up 26% with 982 registrations; Subaru was up 11% to 741 registrations; Hyundai was up 4% to 2,800; Mazda was up 5% to 2,625 registrations; and Jaguar was up 18.5% to 339 registrations.
The rest of the brands have all seen declines for the year.
On the luxury front, Lexus has been hit harder than the BMW and Mercedes-Benz brands, but it beat out BMW for the first nine months in the number of registrations. Lexus was down nearly 28% to 5,806 autos. Mercedes was down 13% to 6,515 registrations and BMW was down nearly 14% to 5,708.
From Rags to Riches
American Rag Compagnie is starting to feel more at home in its second year at the Fashion Island mall.
“OC is finally receiving us,” said Mark Werts, co-owner of the chain of high-end trendy and vintage clothing and accessories store with his partner Rudolph Faulcon. “The first year was difficult.”
American Rag LLC has three stores in the U.S. The other two are Los Angeles and San Francisco. It recently expanded into Japan, where it opened several stores with a partner there. The American Rag brand also sells at Macy’s stores.
The 21,000-square-foot Newport Beach store, which also sells home decor, music and has an attached cafe, is in part of the mall that isn’t shopped as frequently, Werts said.
“We were surrounded by vacancies,” he said.
But this year the store has fared better and Werts is expecting an uptick after Nordstrom opens in 2010, he said.
He found that the store also had to tweak its merchandise to be in tune with the OC
shopper.
“There’s a very different vibe between OC and L.A.,” Werts said.
The OC store needed to sell more beach-appropriate clothing than Los Angeles, he said. So American Rag brought in more swimwear fashions to the Fashion Island store.
People’s fashion tastes are influenced by the ocean lifestyle, he said.
“In L.A., that isn’t there,” Werts said. There is a more urban flair in Los Angeles.
“Hip is a relative word,” he said.
The tweaks to merchandising seemed to be kicking in. In the first two weeks of October, the store was up 46% from the same period in 2007. For the year, it’s up 5% from the same time last year.
“Everybody else we know is having a treacherous year,” Werts said. “Some of the weaker businesses are going to get wiped off the map.”
American Rag’s clothing sales have compensated for declining home decor sales, which have been hit hard as fewer homeowners fix up their properties, Werts said.
The store also recently received its beer and wine license, which has been a big boost to its cafe, he said. The process of getting a license in OC was rigorous, more so than it was in San Francisco and Los Angeles, he said.
Werts said jeans are still a top selling item. The store sells everything from the $45 Levis to $2,000 designer jeans.
“Every product has a cycle. Blue jeans are good for the next 250 years,” he said.
Vintage clothing sales are also up, he said.
“We’re optimistic for this year and next,” Werts said.
