Can this be the right time to invest in luxury goods? Miuccia Prada was obviously biting her nails. The granddaughter of the founder of the Italian fashion group has just opened spectacular new stores in quick succession in New York and London. With its magic mirrors, silver displays and computer-controlled changing rooms, Prada's two-month-old shop in Manhattan cost a staggering $40m, sits just a mile from Ground Zero, and sells practically nothing. The luxury-goods business has been in despair in hasty succession against a background of a weakening global economy, an enduring slump in Japanese spending, and the September 11th terrorist attacks. The Japanese, who used to buy a third of the world's luxury goods, cut their foreign travel in half after the attacks and tightened their Louis Vuitton purse-strings. At the same time, wealthy Americans stopped flying, which has a dramatic effect on the luxury-goods purveyors of London, Paris and Rome. At home too, Americans'attitudes to luxury changed, at least temporarily. 'Conspicuous abstention' replaced greedy consumerism among the fast-growing, younger breed of newly rich. The decline in job security, the lower bonuses in financial services, and the stock market bust that wiped out much of the paper wealth generated in the late 1990s, bred a new frugality. Sales of expensive jewelry, watches and handbags—the products that make the juiciest profits for the big luxury-goods groups—dropped sharply. The impact has been most striking among the handful of large, quoted luxury-goods companies. France's Louis Vuitton Moet Hennessy (LVMH), the industry leader, issued four profits warnings after September 11th and ended up reporting a 20% decline in operating profit for 2001, after having repeatedly promised its investors double-digit growth and Italy's Gucci Group, the third largest, announced this week that second-half profits dropped by 33%. Meanwhile, privately held Prada had to postpone its stock market flotation and was forced to sell a recently acquired stake in Fendi, a prestigious Italian bag maker, in order to reduce its debts. Luxury is an unusual business. A luxury brand cannot be extended indefinitely: if it becomes too common, it is devalued, as Pierre Cardin and Ralph Lauren proved by sticking their labels on everything from T-shirts to paint. Equally, a brand name can be undermined if it is not advertised consistently, or if it is displayed and sold poorly. Sagra Maceira de Rosen, a luxury-goods analyst at J.P. Morgan, argues that, 'Luxury companies are primarily retailers. In retailing, the most important thing is execution, and execution is all about management. You may have the best designed product, but if you don't get it into the right kind of shop at the right time, you will fail.' By 'Miuccia Prada was obviously biting her nails'(Paragraph 1), the author means