Paris goes to war over handbags

The elitist world of Paris high luxury, where a customised handbag can cost more than a car, appears immune to the financial crisis. The French label Hermes has made so much money this year it is likely to post the best results of its 173-year history, and has just opened a lavish store in the old art deco swimming pool of a Left Bank hotel. But behind the success of silk-scarves and crocodile-skin clutches, Paris fashion is being torn apart by secretive empire-building and power-struggles dubbed the "handbag wars". Advertisement: Story continues below Hermes – the family brand that prides itself on being more interested in leather hand-stitching than bling – says it is under attack from one of the world's richest men. It emerged last month that Bernard Arnault, the owner of LVMH, a champagne and luxury goods empire, which includes Louis Vuitton and Dior, had secretly acquired a 17 per cent stake in the Hermes family firm. Since then, the two sides have been at war. The dispute is being billed as a David and Goliath stand-off which also calls into question the promise of the President, Nicolas Sarkozy, for financial transparency on the Paris stock exchange. Hermes's bosses claim they were stupefied to discover that Arnault had built up a stake using a legal but shadowy derivatives system that masked his identity. The brand's hand-crafted "it-bags", the Kelly and the Birkin, can cost tens of thousands of dollars if customers have the patience to join a waiting list that once lasted six years. While the world luxury sector's profits dropped in 2009, Hermes has experienced a 20 per cent surge in sales in the first half of this year. Mr Arnault is France's richest man, a close friend and former best-man of Mr Sarkozy. He has made his fortune acquiring firms and his luxury goods empire includes Moet & Chandon, the world's biggest champagne maker, as well as fashion houses Marc Jacobs and Celine. Known in France as the "Pope of Luxury", he has long been said to have an eye on Hermes's prestigious brand. Ten years ago he failed in an attempt to take over Gucci. Hermes bosses, fearing that his business savvy is too tough a match for the family firm, have made a rare public plea for him to get out and sell his shares. Outraged, he promised he was "peaceful" and "friendly", keen to protect the French label from Swiss or Chinese interest. Hermes snapped back that this was "pure invention".