By  on December 6, 2005

Flagships as grand — and as frequented — as a Guggenheim museum. Handbags that cost as much as a Hummer — and purchased on a whim.

Those were among the signs of a banner year for luxury, when most players posted double-digit sales and profit gains, thanks to a booming stock market and a strong consumer tendency to trade up to the best.

As Michele Norsa, chief executive of Valentino Fashion Group, put it last September: "Tourism has picked up, new markets are opening up and there is a lot of cash around."

And how. Ultraexpensive items, from $30,000 crocodile handbags to $58,000 diamond-studded watches, were such brisk sellers at designer boutiques and specialty stores that buyers wished they had ordered more. Janet Brown, who operates a namesake fashion boutique in Port Washington, N.Y., said of the $3,000 gowns and $7,000 fur coats from Lanvin she carries, "Their shelf life is usually a day."

Gucci Group was among luxury players to seize on this upscaling phenomenon, which propelled its sales in the third quarter by 11.6 percent. Leather goods led the increase, with nine out its 10 best-selling bags from the pricy La Pelle Guccissima line.

"When a product becomes a must-have piece, its price does not matter anymore," said Gucci Group president and ceo Robert Polet. "There has been a strong trend toward individuality and a desire for product made with superior quality, precious materials and outstanding craftsmanship."

Chanel said robust sales of luxury ready-to-wear in its boutiques, at prices approaching the opening ranges of couture, proved that a ceiling has yet to be reached for today's elite shopper. "I don't see price resistance at all at the highest prices," said Chanel SA president Françoise Montenay, citing sellouts of $41,300 coats and $30,500 knit ensembles for fall.

The good times rolled around the globe, with the U.S., Asia and the Middle East — awash in oil money — among the standout markets. Even Europe, with its long-anemic economies and atrophied image, showed some vigor, boosting the fortunes of firms like Hermès International, which saw its sales there advance 5.7 percent in the third quarter. Japan, also crucial to the luxury sector, rebounded nicely."We are very optimistic," an upbeat Bernard Arnault said while reporting a 19 percent leap in first-half profits at LVMH Moët Hennessy Louis Vuitton, the world's biggest luxury player. Neither shoddy counterfeit handbags nor natural disasters could dent Arnault's enthusiasm: Hurricane Katrina's impact was deemed fairly limited on LVMH's fortunes in the third quarter.

Compagnie Financière Richemont was also bullish about its fiscal year, citing vigorous demand for high-end watches and jewelry worldwide. "I am confident that, in the absence of any external events outside our control, Richemont's luxury business will report good growth."

In a bold expression of its confidence, high-flying Louis Vuitton in October christened its largest store in the world on the Champs-Elysées at the climax of Paris Fashion Week. The sumptuous, art-stuffed 20,500-square-foot behemoth has shoppers gradually wind their way down a central atrium after being whisked up a 70-foot escalator.

And that wasn't the last of Vuitton's big retail statements. As an encore, Vuitton unveiled an 8,500-square-foot global flagship in Beijing in November and now, with Marc Jacobs in tow, will fete an expanded location in The Landmark in booming Hong Kong on Thursday.

While China remained in the spotlight as luxury's latest land of opportunity, some argued that fast-growing wealth and a sharp appetite for luxury make America almost as important as China as an emerging market for European makers of high-end fashions and accessories.

In a report, HSBC luxury analysts Antoine Belge and Erwan Rambourg characterized the U.S. as an underdeveloped luxury market promising consolidated annual growth of 12 percent.

"Luxury has become such a necessity for U.S. consumers, who we believe will save on other products [and] services in order to continue displaying social status through brand purchases," they wrote.

Among the factors boosting demand in America are: a fast-growing population, notably of Hispanics keen to display social status; strong GDP prospects swelling the ranks of the richest; a readiness to indulge in premium products, especially among younger generations, and an enthusiastic reaction to celebrities who now endorse a range of European brands.

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