Francesco Trapani, chief executive of Bulgari Group, is cutting back on the fixed costs of his jet-setting lifestyle. The jewelry, luxury-goods and hotel magnate recently sold his 137-foot yacht, the “Christianne B,” and he's holding off on buying any more homes. Even his Micocci shirt was slightly frayed at the collar last week — a fact he acknowledged with an apologetic smile.
“I'm being more prudent,” he said. “I spent a lot of money this summer renting houses and things. But when the summer's over, it's over.”
Not even the richest people are feeling untouched by our current financial crisis. In their personal lives, as in business, the purveyors of luxury are sizing up what it all means. Some of the questions: Is it unseemly to spend money publicly? Will people still shop for the all-important holiday season? Is this the end of bling?
Francois Henri Pinault, chief executive of French luxury giant PPR, said a few weeks ago that there will always be rich people, but the question is how they will behave as consumers.
The answer may have a lot to do with how these consumers want to be seen. It's not necessarily a good thing to show up at the tennis club with a new $30,000 crocodile handbag when your friends' net worth has been halved and the Federal Reserve is spending billions to keep the banking system afloat.
On Monday, when U.S. Rep. Henry Waxman grilled Lehman chief Richard Fuld over his multimillion-dollar bonuses, he suggested that public feeling is running against the vast wealth some executives have gained in recent years. Two AIG executives got a similar congressional grilling Tuesday for the bonuses the insurance giant showered on some employees, as well as its lavish spending on a luxury retreat for insurance agents after the announcement of a government-backed bailout.
Some luxury executives are simply waiting to see what happens. Barry Sternlicht, chairman and chief executive of the private investment fund Starwood Capital, has been on a luxury investment tear in recent years, buying up such things as champagne maker Taittinger, the Hotel de Crillon in Paris and Baccarat. Last week, when asked how he's doing these days, he said he's “just waiting out the tsunami.”
“That's what this is,” he said, “a financial tsunami.”
Retailers like Saks Fifth Avenue and Bergdorf Goodman were planning to buy more carefully for the spring season — “we're sharpening our pencils,” as Linda Fargo, Bergdorf's fashion director, put it last week.
But at the opening of its new women's store in Paris last week, Ralph Lauren upped the ante on its notoriously expensive Ricky bag: It will now be available made-to-order in 20 shades of alligator skin, including platinum, “vibrant cherry” or cobalt, and priced from $12,995 to $28,995. The company is confident that it's well-positioned with its customers, said Charles Fagan, an executive vice president at Ralph Lauren, before racing off to open a new store in Istanbul.
Desiree Bollier, chief executive of London-based Value Retail, which operates premium outlet malls in Europe, says luxury brands are increasingly willing to unload their unsold goods at her company's outlets. Among those that have recently opened stores or will soon at Value Retail malls: Baccarat, Jimmy Choo and Dolce & Gabbana. Value Retail, which earns a percentage of sales at its malls, may be one of the winners in the post-crisis economy: The company expects its revenue to rise 20 percent this year.
For those in the full-priced retail business, this doesn't bode well for the holidays. “The things that are happening are so big,” Trapani said, “that it would be silly to assume they won't have an impact.”