Catering to the rich and poor

We live in an economy where luxury shops and dollar stores are doing spectacularly well. It's an odd distribution that some analysts describe as an hourglass -- bulging at the highest and lowest income levels.

The middle class? History. The housing market bust and the high unemployment rate have taken a huge toll on what was once a steady middle class (families with annual incomes of between $50,000 and $140,000).

Now, companies are changing their focus to cater to the rich and the poor -- but not that crumbling area in between.Tiffany (TIF), for example, is doing gangbuster business selling to the wealthy, but the lower-priced silver items targeted to the middle class are its weakest sellers, The Wall Street Journal reports.

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Target (TGT) and Wal-Mart (WMT) used to do well with its more expensive items, such as furniture and clothing. Now, they're focused on food and basic household gear in an effort to keep customers from fleeing to dollar stores.

Some companies are going for both groups. Procter & Gamble (PG), for example, makes the pricey Olay Pro-X skin care line, but it also touts the cheap Gain dish soap.

You can see this divergence more clearly in the Gini index, which measures income inequality. In 2009, the index showed a 20% rise in income disparity over the last 40 years, the Journal reported. The U.S. level was on par with the Philippines or Mexico.

That income disparity means that retailers like Coach (COH) and Estée Lauder (EL) are doing just fine. So are Family Dollar Stores (FDO), whose shares are trading above $50, and Dollar Tree (DLTR).

But the companies that once reached out to the broad swath of middle America are having a tougher time. That could bring about strategy changes for Kraft (KFT) and Johnson & Johnson (JNJ) in addition to what we've already seen at Wal-Mart and Target.