Dollar Days For The Cartier Crowd

Salespeople in Louis Vuitton's plush Manhattan boutique didn't have to knock themselves out when Kanako Kitaguchi walked through the door. The 19-year-old student from Osaka came armed with a shopping list: a $1,000 black purse ordered up by her mother and a $100 bright-yellow leather key chain for her sister. "My mother asked me to buy them in New York because it's cheaper," says Kitaguchi, clad in a Calvin Klein T-shirt, combat boots, and a fashionable nylon backpack. "In Japan, it is very expensive."

No kidding. If her mother had bought those items at home, she would have paid an extra $490. While other retail sectors languish, sales of luxury goods--Herms scarves, Chanel bags, Ferragamo shoes, and similar trappings of the jet set--are booming. It's a global phenomenon, thanks to a general pickup in travel, a more stable world economy, and a backlash against early '90s frugality. Salvatore Ferragamo's worldwide sales leaped 47%, to $327 million, in 1994, and Louis Vuitton Malletier's sales jumped 19%, to $1.3 billion. The demand for handmade leather goods is so strong that Ferragamo and Chanel limit the number of shoes and bags their customers can buy. And while the hoi polloi must offer sales, deals, and discounts, luxury labels cost more than ever. That $245 Herms scarf was $225 a year ago. Vuitton hiked prices 6% in the U.S. in May.

The boom is particularly striking in the U.S., where a weak dollar makes ultrahigh-priced items, from $5,000 exotic-skin Judith Leiber daytime handbags to $450 Herms umbrellas, look like bargains to shoppers from Brazil, Germany, and Japan. "The dollar differential is definitely contributing to sales," says Michael A. Burke, president of Louis Vuitton North America Inc. "It's probably about half the equation."

The luxury-buying binge is especially strong on both coasts and in Hawaii. Honolulu, just seven jet hours from Tokyo and a favorite destination for vacationing Japanese, has become a luxury retailer's paradise. The U.S. Travel and Tourism Administration estimates that 4.4 million Japanese will visit the U.S. this year and that nearly half of them will go to Hawaii. Isaac Lagnado, principal at New York consultant Tactical Retail Solutions Inc., says Japanese visitors will spend about $2 billion on merchandise in the U.S. At New York jeweler Harry Winston, Japanese tourists snap up its "less expensive" $7,400 watches to pass out to friends and relatives back home. And Cartier does a brisk business in $1,050 tricolor gold rings.

Americans are also scooping up more luxury goods these days. In the recession-ridden early 1990s, even wealthy consumers rejected the ostentation of the previous decade. The rich still aren't wearing flashy clothes, says retail consultant Alan G. Millstein, but now, they're going for pricey accessories. In the past 18 months, it has become chic again to carry a $1,400 Chanel bag or drape a $245 Herms silk scarf around your neck. Carolyn Lawrence, an interior designer who recently visited the Manhattan Herms store, says she cut back on her spending for a few years but began visiting her favorite luxury boutiques again early last year. "You get tired of being frugal and concerned," says Lawrence, 52.

LIMITED SUPPLY. To satisfy the surging demand, many luxury purveyors are expanding their U.S. operations. Louis Vuitton plans to triple the size of its New York store within two years. Chanel has opened new stores in Bal Harbour, Fla., Aspen, Colo., and Lahaina, Hawaii, in the past year. For younger globe-trotters, a $470 nylon and leather backpack from Prada, the Italian apparel and accessories designer, has become part of the uniform. In response, Saks Fifth Avenue recently opened 11 Prada boutiques across the country.

Some luxury-goods makers are also ramping up production to meet the added demand. After Vuitton logged its highest-ever level of back orders at the end of last year, it hired 650 additional factory workers. But increasing the number of handmade goodies on the shelf without compromising quality is tough. That's why rationing has come to Rodeo Drive. There's a six-month wait for some Herms purses. Chanel limits its boutique customers to two handbags each, while Ferragamo limits customers to fewer than 10 items. Makes it tough for a status shopper to buy in bulk.

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