Poor struggling, rich spending as Christmas nears

NEW YORK/LOS ANGELES - Adriana Garcia won't be buying her family Christmas gifts this year.

The 26-year-old from Huntington Park, California lost her job as a teacher's assistant last year and now works part-time at a Jamba Juice near Los Angeles.

Her husband, a security guard unable to work since hurting his hand three months ago, is not yet getting his disability checks. The couple spends on the basics: food and rent.

"I don't really care about the presents," said Garcia.

Kelly Lenehan, a 40-year-old ultrasound technician and former paparazzo from Los Angeles, lost her job in her new field in early November, and is also planning a low key holiday.

"It can't be the way I want it to be, and that's the difficult thing about it," she said.

A record turnout two weeks ago on Black Friday, the day after Thanksgiving, when tens of millions of Americans, lured by bargains, hit stores to kick their holiday shopping into high gear, belied how much many Americans still struggle.

Stores such as Kohl's Corp and Gap Inc's Old Navy and J.C. Penney Co Inc all reported sales declines in November, as shoppers proved more frugal than television images of in-store bedlam would have suggested. Meanwhile, bargain basement chains like Dollar General have been on a tear.

The National Retail Federation expects holiday retail sales to be up 2.8 percent, below last year's 5.2 percent increase.

In contrast, sales at luxury stores like Saks Fifth Avenue and Nordstrom Inc have soared all year and their November sales -- Saks' same-store sales rose 9.3 percent -- show holiday sales are off to a strong start.

"I've been fortunate to have a good year, so I am feeling good. Trying to kick start the economy," said Andrew Rothstein, a 40-year-old investment banker with TD Waterhouse shopping at Saks Fifth Avenue's flagship store in Manhattan last week.

Unemployment slipped last month to 8.6 percent, in part because many job seekers simply gave up looking. The rising cost of food and fuel is adding to the pinch, curbing the spending power of millions and delaying a meaningful recovery in consumer spending.

Adam Morales, a 64-year-old retiree from Louisiana on a fixed income, said he'll spend less on gifts for his five children and seven grandchildren. "The price of living went up so much," he said. "Last year, I spent $25 on each one. This year I will have to spend $10," he said.

Retailers know how hard it is for shoppers this year: Wal-Mart Stores Inc brought back its layaway program after a five-year break.

Even people making decent money are being cautious. Aldo Inoster, a stock broker from Queens, New York, will limit his Christmas gifts to family members.

"It has to be a very sweet deal to get us out shopping," said Inoster, 50, while shopping at an Old Navy in New York's Herald Square on Thanksgiving.

FOR THE RICH, GETTING BACK TO NORMAL

At the high end of the widening income gap, many Americans are shopping like it's 2007 again.

On Friday night, stores on Manhattan's luxury avenues were packed, with people waiting several turns before being able to use the elevator at Tiffany's store on Fifth Avenue.

Luxury chain Neiman Marcus said last week it has sold out of the ten 2012 Ferrari sports cars it offered in its Christmas book of fantasy gifts for $395,000 each.

Yet for all the talk of luxury's rebound, sales at chains like Saks remain below levels prior to the 2008 financial crisis, which stopped high end shopping in its tracks. Many wealthy Americans don't think the economy is out of jeopardy.

Peter White, principal of a technology staffing company in Houston, said business is picking up though he is still not going gangbusters with shopping this year.

"One of the reasons we're up here is because things are starting to slowly turn around," said White, who took his family to New York for a Christmas shopping trip that included a visit to Tiffany on Friday. "I would never have made this trip two years ago."

Nonetheless, the wealthy don't pull back much on luxury even when markets are rough, as they have been, because their "spending money" is not tied up in the stock market, said Jonathan Bergman, a vice president at Palisades Hudson Financial Group, whose clients include CEOs and have median accounts of $5 million.

Millionaires, who account for nearly half of U.S. luxury sales, have enough cash to keep up their spending habits even if their income droops for a year, said Boston Consulting Group senior partner Jean-Marc Bellaiche.

"The fact that you make a little bit less this year will not affect your ability to buy a $3,000 watch," he said.

(Reporting by Phil Wahba and Dhanya Skariachan in New York, Lisa Baertlein and Martha Sanchez-Avila in Los Angeles; Editing by Steve Orlofsky)