By  on August 1, 2005

PARIS — With the closing of one of its landmarks, France's department stores are weathering a season of turbulence compounded by an economy troubled by high unemployment and weak consumer spending.

La Samaritaine, the LVMH Moët Hennessy Louis Vuitton-owned department store overlooking the River Seine, has told workers it would stay shut as long as six years because it would be a fire hazard to stay open.

Management has pledged to "maintain" the contracts of its 750 employees through October 2006, while trying to find them work elsewhere or placing them in new positions in the French luxury group.

Analysts said the shutdown would be but a ripple on the bottom line of LVMH. The conglomerate had sales of 12.6 billion euros, or $15.7 billion at average exchange, last year.

But it is almost certain to breed unrest in a country notorious for its social protests. Paris' Socialist mayor, Bertrand Delanoe, got involved last month by promising his support to save jobs. And the workers' committee at another LVMH-owned department store, Le Bon Marché, said it had filed a complaint because of a lack of management transparency, questioning how LVMH would relocate its workers from the Samaritaine to Le Bon Marché.

There also has been upheaval at other department stores in France weakened by competition with fast-fashion chains.

Galeries Lafayette, which operates its flagship on the Boulevard Haussmann in Paris, recently shuttered five of its stores in the French provinces because they weren't making money. Meanwhile, Galeries was divided by a bitter takeover fight between its two founding families — the Moulins and the Meyers — which the Moulins won by teaming with French bank BNP Paribas.

Down the street at Printemps, which is owned by luxury conglomerate PPR, takeover rumors have surfaced regularly since the beginning of the year. PPR, which also owns Gucci Group, has denied it is seeking to sell the store because it isn't profitable enough.

Meanwhile, BHV, an Ali Baba-like bazaar that sells everything from hardware to sportswear, has said it will spend 45 million euros, or $54.4 million at current exchange, to revamp as it tries to stave off its declining sales.Analysts said department stores have declined to 3 percent of the country's total retail sales. According to data released last month, clothing sales at department stores in France dropped 9 percent in June, one of the worst months for the stores this year.

"The environment in France isn't stellar," said Christian Devismes, a retail analyst at Natexis Bleichroeder in Paris.

Jean-Marc Genis, director of retail research firm Conseil Nationale de Sucursalistes de l'Habillement, said department stores have suffered against rival fast-fashion chains such as Zara and Hennes & Mauritz.

"These types of specialized retailers are faring best this year as a whole," said Genis, adding that fast-fashion sales in France were up about 3 percent this year.

French consumer confidence fell 0.2 percent in the second quarter of the year as spending power dwindled and unemployment persisted at more than 10 percent, according to Insee, a national tracking firm.

La Samaritaine's troubles started in February when Paris inspectors said the store's intricate Art Nouveau structure, which Emile Zola wrote about in his 19th-century novel about shopping, "Au Bonheur des Dames," would burn in minutes in the event of fire.

Philippe de Beauvoir, the store's president, closed it in June to evaluate the extent of the work.

Speculation surfaced that LVMH was hiding its hand because it sought to turn the store into a hotel or that LVMH chairman Bernard Arnault wanted to use the building for a private museum of his art. LVMH denied the claims.

Beauvoir last month outlined two possible scenarios to secure safety at the store. One, he said, would shut it completely for as long as six years. Another would close sections for renovation while leaving portions open for business.

Beauvoir said he would shut the store completely because "the hypothesis of a complete closure during the duration of the works appears to be best from a security and technical point of view."

The closing derails LVMH's plans to transform the Samaritaine, which it acquired in 2000, into a new luxury hub.

Over the last five years, LVMH has invested some 50 million euros, or $51.4 million at the average exchange rate for that period, to revamp its image while taking it more upscale.Despite the gloomy environment, stores are fighting back. They are trying to attract customers by offering more luxury goods and creative fashion, two sectors in which they think fast-fashion chains can't match them.

For instance, Galeries Lafayette in September plans to inaugurate an 8,000-square-foot designer area, mixing brands such as Azzedine Alaïa and Chloé with Rochas and Lanvin.

Meanwhile, Le Bon Marché continues to renovate its fashion floors, and Printemps is redoing its accessories floor at its Paris flagship. In September, it also will inaugurate a new lingerie concept.

Fashion, particularly expensive women's wear, is driving business, executives said.

At Printemps, for instance, sales of women's rtw are up 8 percent since January, while store sales overall are barely above flat.

"Luxury and women's fashion are now the main drivers of our business," said Laurence Danon, president of the chain's 17 stores. "The métier has changed. Today, you have to be very specialized. There's too much competition elsewhere."

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