Shining in the Gloom

By Theil, Stefan; Brownell, Ginanne et al. | Newsweek International, May 26, 2008 | Go to article overview

Shining in the Gloom


Theil, Stefan, Brownell, Ginanne, Cunningham, Jaime, Newsweek International


Byline: Stefan Theil; With Ginanne Brownell in London and Jaime Cunningham in New YorkWith in London and in New York

The rest of the world may be feeling an economic pinch, but for the richest of the rich, the luxury spending spree goes on unfettered.

At Christie's May 5 New York auction of impressionist and early modern art, the financial meltdown that's been gripping the globe for the better part of a year was nowhere in evidence. The world's wealthy snapped up Monets, Rodins and Giacomettis at record-setting prices. American buyers were in the minority, as a swarm of Europeans flew in to take advantage of the tumbling dollar. Christie's CEO Edward Dolman says wealthy Russians accounted for another big chunk of the $277 million take--the house's third highest ever for modernist art. Billionaire collector Nicolas Berggruen, the French founder of Berggruen Holdings, says his bids were outgunned each time, with some of the better-known works--including Rodin's "Eve"--fetching two or three times Christie's pre-auction estimates. "I've been waiting for prices to come down ever since the financial crisis started, but it's not happening," he says. "It's bizarre. Logically it should all come falling down, but it isn't."

What recession? Fresh numbers last week showed another deepening of the real-estate slump hitting middle-class Americans, and one industry after another has faced consumer belt-tightening and soaring energy costs. But there's one segment of the population--and the economy--that seems to be above such pedestrian concerns: the superwealthy, and the businesses that serve them. Consider the latest news from the world's top luxury brands: Bottega Veneta, the Italian purveyor of $1,350 wedge-heel sandals and $18,400 leather tote bags, just reported first-quarter global sales up an impressive 31.5 percent. That's on top of a 49 percent surge in 2007. In April, Prada reported its best results ever, with profits up 66 percent for the 12 months ending Jan. 31. Last week Hermes cheered markets with a first-quarter sales rise of 13 percent--including a surprisinga23 percent jump in the United States, thanks in part to its posh new Manhattan flagship store, right across from the New York Stock Exchange.

Indeed, top-end luxury consumers seem almost invigorated by the rest of the world's economic woes. According to a February survey by Prince & Associates, while average consumers said they planned to cut back on shopping, 80 percent of the richest Americans--those worth $10 million or more--actually planned to increase their luxury spending. Meredyth Smith, senior vice president of Sotheby's International Realty, says the market for big properties in New York City--featuring, say, an indoor gym and staff quarters--is still "extremely strong." In addition to real estate, top luxury consumers are also investing in such amenities as bespoke perfume, superyachts, art and authentic travel experiences, as the ensuing stories in this SPECIAL REPORT reveal.

The luxury market owes its resilience largely to the fact that it is less dependent than ever on American buyers who might have been hit by the slowdown. So many new fortunes have been created across the globe in recent years that there seems to be an endless train of moneyed Muscovites and Brazilians ready to scoop up fine art, London townhouses and $3,500 bottles of Krug Clos d'Ambonnay champagne. …

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