Arnault Eyeballs Calvin Klein from Glass House on 57th Street

A week after Calvin Klein announced that he had hired Lazard

Frères & Company to help him consider the sale of his company, Bernard

Arnault, the man deemed the most likely buyer, was in Manhattan to conduct a

little business of his own.

Mr. Arnault, the chairman of luxury giant LVMH-Moët Hennessy

Louis Vuitton, was here to celebrate the Oct. 13 opening of the  Sephora flagship store at Rockefeller

Center, yet another beachhead in his invasion of New York.

Flanked by three beefy bodyguards, his wife, Helene Mercier

Arnault, and his pet designer, John Galliano, he stood inside the store near a

display rack of CKOne, the Calvin Klein fragrance, and greeted his guests.

There were a lot of them, and as they squeezed past, a few couldn’t help but

bump the stand of CKOne. Bottle after bottle fell to the floor. The bottles

broke, and the soapy androgynous smell of Mr. Klein’s mass fragrance filled the

air. Mr. Arnault didn’t even wince.

But he pursed his lips when asked whether he might like to buy

Calvin Klein. “It’s a great brand,” he said. Had he met Mr. Klein? “No,” he

said. “Not yet.”

Not yet. But Mr. Arnault will certainly be among the first to get

a look at the Calvin Klein book that Lazard will distribute to potential

bidders. (Mr. Arnault goes back a ways with Lazard. His earliest backer was

Antoine Bernheim, a senior managing partner.) The LVMH chairman comes to mind

first, not only because of his aggressively acquisitive style and his deep war

chest, but because he has recently been snapping up American companies to

complement his vast European holdings in fashion and luxury retail. In the last

seven months, this wiry, calculating conglomerateur

from France has been infiltrating the closets, Palm Pilots and conversation of

Manhattan’s fashion cliques as a succession of small but well-regarded American

brand names have been absorbed by the LVMH juggernaut. Now suddenly, Monsieur Bernard,

he is everywhere, but people don’t quite know what to make of him.

On Dec. 8, Mr. Arnault will unveil his new New York base of

operations: a new 23-story, $40 million-plus glass-and-steel building on 57th

Street and Madison Avenue. It will house a Louis Vuitton flagship, a Christian

Dior boutique, a new Bliss Spa and headquarters for LVMH’s executives in the

United States. “It’s a very important retail space,” said Faith Hope Consolo of

store leasing specialists Garrick-Aug Worldwide. “It’s a presence almost equal

to Tiffany’s or Bergdorf’s.”

At the top of the building, designed by Pritzker Prize winner

Christian de Portzamparc, is a large glass-enclosed room, the nerve center for

Mr. Arnault’s Manhattan campaign. “The Magic Room!” Mr. Arnault said proudly.

“The Magic Room!” echoed Mr. Portzamparc. On Dec. 8, before le tout New York, Mr. Arnault will host

a Municipal Art Society gala in the Magic Room. All Galliano’s ladies (Nan

Kempner and friends) will be there, as will all of Michael Kors’ and Marc

Jacobs’ (Miller sisters, Vogue

editors, and plenty of girls who, for whatever reason, aspire to be like them).

As they drink the company champagne, and look through the windows across 57th

Street and down Madison Avenue, toward the streets of SoHo, they will come to

realize that-abracadabra!-they are Arnault’s ladies now, gazing out at

Arnault’s world.

Mr. Arnault’s American fetish began three years ago when he

started hiring American designers to revitalize LVMH’s European fashion

houses-Marc Jacobs at Louis Vuitton, Michael Kors at Celine, and Narciso

Rodriguez at Loewe-overlooking French talents like Eric Bergère and Jean-Paul Gaultier.

He was bringing New York to Paris.

But then in April, when Mr. Arnault bought Bliss, the impossibly

popular SoHo spa, for an estimated $30 million, Paris came to New York. It was

the equivalent of an invading army’s seizing control of a nation’s communications

centers. Bliss had the right kind of customers: Nolita girls and young

socialites with clean faces, rather than Milanese matrons with bonded teeth,

streaked hair and yards of Hermès scarves. By starting out with Bliss, Mr.

Arnault was sending a dual signal: I am here, and I understand what you like.

In July 1998, Sephora, the cosmetics and beauty-supply retail

chain owned by LVMH, opened its first store in America, in SoHo. Then, on Oct.

13, he officially moved the chain’s flagship from the Champs-Élysées to Fifth

Avenue, when he opened the Rockefeller Center store. In the intervening months,

he had bought little American companies like Hard Candy and BeneFit Cosmetics,

as well as stakes in some larger European fashion labels: British shirtmaker

Thomas Pink, Swiss watchmaker Tag Heuer and Italian baguette-bag maker Fendi

(in a $900 million joint venture with Prada). With every move, he dug deeper

into the consciousness of fashion-savvy New Yorkers.

This is actually Mr. Arnault’s second attempt to make it in New

York. For three years during the early 80′s, he lived in upstate New Rochelle,

at a time when many French businessmen left France in the wake of the election

of its Socialist president, François Mitterrand. Back then, Mr. Arnault was a

real estate developer attempting to expand his family’s real estate business

into the United States. But, in 1984, he sold the family business (without

telling his father until after he’d done so), sold his house to neighbor John

Kluge (who tore it down) and returned to France to buy Broussac, a bankrupt

textiles company that owned Christian Dior. (Lazard Frères helped him finance

the purchase.) He sold off the parts, held onto Dior and used it as a launching

pad for his dreams of creating a giant luxury conglomerate.In 1988, again with

Lazard’s backing, he went after LVMH After a two year battle, he had sole

control of the company-and a reputation in France for overly aggressive

business tactics that seemed, well, American.

Now, after a decade of buying, the empire includes Louis Vuitton,

Loewe, Celine, Christian Dior, Givenchy, Kenzo, Fendi, Thomas Pink and Regina

Rubens; the luxury liquor companies Dom Pérignon, Moët & Chandon, Veuve

Clicquot, Krug and Pommery Champagnes, Hennessy and Hine cognacs, Château

d’Yquem wines. In beauty and cosmetics, LVMH owns Guerlain perfumes, Sephora

(which functions as something of a company store these days), Bliss, Benefit

and Hard Candy (as well as the cosmetics and perfume divisions of LVMH’s

fashion labels.) LVMH also controls Duty Free (wrangled from Robert Miller in

1996, in another bruising battle), which gives the company a convenient

distribution channel for its products.

Mr. Arnault recently started a $516 million Internet investment

group called Europweb, which has made investments in on-line fashion retailer

Boo.com and on-line pharmacy Rx.com (sure to carry LVMH cosmetics). Mr. Arnault

has also announced an interest in beefing up his luxury watch and jewelry

department. Hence his recent purchase of Tag Heuer and Fred, a Parisian

jeweler.

Almost as notable are a few of the companies Mr. Arnault does not

own. In his long, bloody, and ultimately unsuccessful bid for control of Gucci,

he was cast as the marauding villain, enemy to high fashion. When François

Pinault, the head of rival French luxury conglomerate

Pinault-Printemps-Redoute, came in as a white knight and acquired control of

Gucci, Mr. Arnault suffered his first major defeat. But it has not deterred him

from continuing his shopping spree.

When it comes to smaller companies, the way Mr. Arnault tends to

operate is this: he identifies a

cheap target with a hot name brand (Bliss Spa, Hard Candy, Thomas Pink), buys a

majority stake, then sets out to help them grow, without tinkering with them

creatively. “We’re good at the silly stuff,” said Bene-Fit co-founder Jean

Danielson. (Bene-Fit’s self-tanner is named Aruba in a Tuba.) “They’ll help us

expand internationally. Like Japan.”

In theory, at least, LVMH provides the money and reach. Take the

example of Bliss. Founder Marcia Kilgore will retain creative control-she’ll

write the copy for the punchy Bliss Out catalogue,

for example-and LVMH will concern itself with turning Bliss into a profitable

national business. “It’s not like she’s driving a hundred Lexuses now,”

explained Bliss spokesman Mara Stern. “It’s more like, instead of 20 hours a

day, we’re working a lazy 16. And all of these projects we’ve been wanting to

do, we can do them now.” These projects include a second spa (inside the new

LVMH building) and pitstop style manicure salons as common as Starbucks. Expect

the first in time for Christmas.

With people whose very names are the commodity, he’s made an

interesting tradeoff. Marc Jacobs, Michael Kors and John Galliano each took

over a major house (Vuitton, Celine and Dior respectively), and in exchange Mr.

Arnault finances their own labels. Marc Jacobs was desperately in need of a

backer when he took over at Vuitton. And Michael Kors, with Mr. Arnault’s help,

will open a mammoth store on high-rent upper Madison, right in the neighborhood

of his “preppy glamour” customers. Only Alexander McQueen, who is at the helm

at Givenchy, does not take money for his own, eponymous label.

 “As a young designer,

[working for LVMH] seems absolutely to be the way to go,” said Bill Blass, the

New York designer. “It gives you an exposure that just being an American

designer doesn’t.”

“I like American designers,” Mr. Arnault said. “They are very

creative, but they also like to sell. They are very close to the consumer, and

they are not only interested in creating new products, but also in their

capacity to make them sell well. So you see for us it’s a very attractive

proposition.”

In fact, the only LVMH-owned house that is losing money is also

the only one with a Frenchman at the helm: Christian Lacroix.

With the older fashion labels, Mr. Arnault’s formula was a bit

different. When Hubert de Givenchy retired, Mr. Givenchy tried to name his

successor: a man who’d trained for years in the atelier beside him. Mr.

Arnault, however, overruled the decision and installed Alexander McQueen-who

exhibited little respect for both Audrey Hepburn and the petites mains -at the head of the house. 

“[Designing for a conglomerate] is like going public,” Mr. Blass

said. “And it will ultimately affect design. You have to provide the dollars,

and that always affects the product. It’s quite a different situation from

owning your own company.”

Regardless, the approach has been effective. Instead of sitting

in the front row at Michael Kors’ “Palm Bitch” ready-to-wear show in New York last September, Mr. Arnault was home in Paris

announcing plump profits: a 59 percent increase in net income for the six

months ending June 30. Operating income for the fashion and leather goods

division of the company was up 15 percent over the same period last year.

The designers affiliated with LVMH issue pat statements about how

grand their lives are. Michael Kors described his working relationship with Mr.

Arnault in a word: “terrific.” And John Galliano, decked out at the Sephora

party in acid-washed jeans, like an avant-garde pirate, gushed as well. “I’m

very proud,” he said. “It’s such a symbol of French luxury. It’s like standing

on the Eiffel Tower!”

The ground floor of the 57th Street Dior boutique space is

boarded up. On a recent afternoon, a man with long sideburns stood outside to

smoke with a European “Can you even believe I can’t smoke inside?” look on his

face. The building is green, and it’s enormous. “Not unlike a seashell,” the

press kit had promised. But it is quite unlike a seashell.

Mr. de Portzamparc, the architect, faced a curious dilemma when

drawing up his plans. Originally, the building’s volume was to be the same as

that of Chanel, the staid, granite Frenchman next door. “We would have the same

dimension, so we would be like two French twins,” Mr. Portzamparc said.

“Bernard Arnault was aware that the building would be the same as Chanel, and

then it would not be a flagship store.” So more space was acquired. The little

Wally Findlay Gallery next door was knocked right over. Bam! LVMH won’t match

Chanel anymore. It’ll be bigger.

Another problem arose. “I.B.M. is right across the street,” Mr.

Portzamparc said, “and we would just be a reflection of I.B.M.” So, on Mr.

Arnault’s orders, he procured some very expensive nonreflective glass. Now, in

addition to dwarfing Chanel, the building outshines the American behemoth

across the street. It is barely possible-in any light-to see I.B.M.’s

foreboding facade reflected in the glass