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C aryn Lerner, chief executive officer at Holt Renfrew & Co., faces the challenge of having to woo well-heeled customers to the luxury retailer at a time when frugality has become the new black.

Ms. Lerner acknowledges the changing times, and is adjusting to them with fashions that are less flashy, though still as pricey. To ease their best customers into a purchase, her staff is offering them a complimentary café latte or box of chocolates.

But she knows the pitfalls of operating in the luxury sector during a recession: High-end U.S. rivals from Neiman Marcus to Nordstrom reported double-digit same-store sales declines in October and November. Up-market chains were doing what they rarely do pre-Christmas: slashing prices.

Holt Renfrew has been holding its own designer sales, but Ms. Lerner says they've been no more extensive than those of last year. And plans are on track for a new store in Calgary next fall, at almost three times the size of the current one.

Still, it's not business as usual. The privately held chain of nine stores has scaled back its financial targets, delaying its goal of $1-billion in annual sales to 2013 from 2011. With annual sales estimated at between $550-million and $600-million, the company has a patient owner in the holding company of the wealthy Weston family, which also controls grocery leader Loblaw Cos. Ltd.

Ms. Lerner, 51, a veteran executive of the U.S. fashion industry who has headed Holts since 2004, has been rumoured to be a candidate for the CEO position at the ailing Barneys New York, a luxury retail icon. She says she's flattered, but isn't going anywhere. "I see a long and bright future here for me," she says. "Nobody is getting rid of me that easily."

When did you become aware of the economic threat, and what was your thinking about it?

We at Holts started to feel the impact in the fall of 2007, when the Canadian dollar hit par with the U.S. dollar. We began to feel a softening in our business. How did we react to that? What we think is very important to do is, when it gets tough, to really harness our energy and our passion to remember and stay true to the DNA of our brand. It becomes more of a reason to continue to innovate and invent and create exciting new ways to drive traffic into our stores.

When did the economic crisis really start to affect Holts?

We have been impacted in the same time frame as all luxury retailers. We had a good first six months of the year and, toward the end of the third quarter and going into the fourth quarter, we, too, have felt a softening in the top line — we've seen it in our sales. But we're not seeing the decline in [same-store] sales that U.S. retailers are seeing.

How is it affecting you?

We're not sitting here taking this lying down and diving under the covers. We're confronting the situation head on. We're trying to elevate the connection with the customers. All through the fall season, we didn't cut back at all on events, on personal appearances by designers, on our holiday window unveiling. That's very much the approach we're taking as we go forward into 2009, looking for new ways to create excitement and drive customers into our stores.

What is your strategy to navigate your way out of this?

We are managing the business prudently. We're looking for newness in product. We continue to look for new designers and new brands. … We're not trading down. We're not changing who Holt Renfrew is. We're very focused on our talent throughout the company, hopefully inspiring them to be positive in their approach with our customers through this time period. We have not made any cutbacks.

What lessons have you taken away from the very rapid economic change of the last few months?

By continuing to be strong and keeping our energy focused, we are seeing some good results, even in an overall depressed economic environment. We launched a new website in May of this year. We've seen 70-per-cent growth in visits and we've had over 100-per-cent growth in our e-newsletter database. How can we leverage that, how can we take advantage of that? There are positives happening, even though the overall news can be difficult.

How does the downturn differ from past slowdowns?

The rapidness of it … the ability to not predict well the recovery. Our motto at Holt: We're not going to wait around for the predictions. The best way to predict the future is to create it. That's why we're taking a more positive and assertive approach to how we're going to be running our business — being true to who we are and the image of the brand.

What adjustments are you making in planning the new Calgary store?

We had planned, because it was such a big space, to do Calgary in two phases. Our learning from the new Vancouver store was that it overwhelmed the marketplace too fast. … In Calgary, we held back 10 to 15 per cent that we're not building out, with the idea to grow into that as the business dictates. That was the plan from the beginning.

F rugality seems to be the new black among consumers. How are you adjusting?

We've seen that reflected in the collections and how the fashion trends are changing. We're also seeing it in what's selling in our stores. The fashions aren't so loud or overt. …Brunello Cucinelli, who is a fairly new designer in our stores, is having a phenomenal year with us and bucking all the trends. He works in cashmere. It's not a basic black cashmere sweater. … It's an investment piece. It's not going to go out of style.

What's your biggest opportunity for 2009?

We're very focused on the Calgary store because it's a big investment for us and it's a big step forward for us in that market. Our biggest opportunity is to continue to elevate the connection with our customer and continue to develop our talent inside the stores.

What's your biggest fear?

That we won't do it. If we get paralyzed, if we start pulling back too severely, if we don't stay true to what we're about, that can be very hurtful for our business. There's no question that it's tough. We have to stay very focused.