The Hermès Birkin bag. (Photo: Hermès)

With the season's first major art auctions still more than a month away, The Observer has been looking for hints about the state of demand in the art market. At the Art Basel art fair in June, dealers reported that clients were spending freely, but we wanted to know just how intensely they are doing so.

And so this news caught our eye: high-end Parisian fashion house Hermès announced that its profits for the first half of the year jumped a jaw-dropping 50 percent over the previous year, with revenues climbing an astounding 21.5 percent, to €1.31 billion ($1.89).

While demand for one brand can hardly augur what will happen in the art and luxury markets in the months to come, those buoyant figures at least provide the possibility that it could get wild in international auction rooms, as the wealthy continue to spend despite longstanding concerns about the state of the international economy.

In fact, the upper echelon's spending at Hermès has been so vigorous that the label says it is running low on its supply of its highly coveted Birkin and Kelly handbags, and has warned that revenue may not expand quite as dramatically in the second half of the year. "We are not resting on our laurels," the company's CEO, Patrick Thomas told The Wall Street Journal. "But we can only make so many bags."

The company's Birkin bags typically start at $10,000 and can venture into six-figure territory depending on their material and design. We'll see if collectors so readily spend such sums in the galleries and auction rooms of New York in coming weeks.

 A violet crocodile Birkin bag sold for $55,726 hours ago, well above its pre-sale estimate, breaking no records, but adding a vivid hue to the collection of one buyer. While not every bag sold, a miel (honey) colored crocodile Birkin went for $59,316 and a matte paille (straw) alligator Birkin was sold at $59,316. A Brighton blue lizard Kelly realized $22,440.

The handbag that sold for the least amount (a measly $1,309) was a box calf Kelly bag in noir - boring old black.

Ever since, the "Kelly" bag has remained one of the most popular items at Hermès, sometimes with a waiting list, according to the company, particularly for versions made of more exotic materials-such as crocodile, ostrich and lizard skin. Later, the French fashion house added the larger Birkin bag, designed for the British actress and Jane Birkin. According to Hermès lore, in the early '80s, Ms. Birkin was placing her purse in the overhead compartment on a plane traveling across Europe when some of her possessions fell out. She complained out loud, wishing for a bag to be large but still stylish. The adjacent passenger was the chief executive of Hermès, Jean-Louis Dumas, and he complied with a purse in her name.

On Wednesday, July 14, Christie's will auction off, in London, 78 Hermès bags, including 36 Kellys and 27 Birkins (they were consigned by various different sellers). The auction-online bidding is available, Christie's notes-also includes the lesser-known "Constance" bag. While sometimes carried by Jacqueline Kennedy Onassis, it was never renamed the "Jackie."

Pat Frost, head of the Textiles Department for Christie's in London, said Hermès doesn't need to rely on celebrities to bolster its reputation. Each bag, she said, is the result of considerable craftsmanship-diagonal stitching, perfectly aligned locks and metalware and feet cast in brass.

Time has proven there's an established auction market for vintage Hermès. And more unusual colors, such as vermillion and violet, fetch higher prices. The most expensive lot to go on the block in London, a violet ostrich Birkin, is estimated at £30,000 to £32,000, or $45,480 to $48,512. (A new Birkin would be about $8,800 at the store on Madison Avenue.)

In the past, people have paid even more. In 2005, William Doyle Galleries fetched $64,800 for a Birkin. 

The artwork, "Jupiter Mission," by the artist team Pamela Reed and Matthew Rader, was unintentionally germane at Thursday evening's party, which Winick Realty hosted with the hope of grasping tenants for 75 Wall's retail space. "In recent years, the Financial District has reinvented itself as a corridor of deluxe residential buildings and high-end retailers," say the brochures that rested on a glass table at the event. The Winick brokers know what they want. The question Thursday evening was whether they would be able to get it.

"We're really pushing for a high-end luxury retailer to come down here," Winick broker and party co-host Annie Shinn said. "But they're slow to pull the trigger."

She rattled off the names of high-end retailers that have already set up camp in the FiDi, names that also appear along the bottom of the brochure's fold-out spread: Hermes, Canali, Tiffany & Co., Thomas Pink, Tumi and BMW. Ms. Shinn, like other real estate brokers who work in the neighborhood, said the area has been evolving into "more of a 24-hour community."

Stephanie Snyder, a broker with Crown Retail, seemed to share Ms. Shinn's optimism. "Despite what happened, Wall Street will always be Wall Street," she said. "It's an iconic location. You don't have a movie named after it for nothing."

But she doubted the area's high-end potential. Another broker, who was chatting with Ms. Snyder, and who withheld his name, thought that only a middle-priced retailer would fit into the neighborhood. He said the area cannot accommodate sellers of luxury goods: Although wealthy people work in the FiDi, they do not shop there. If the neighborhood is "24-hour," he said, that's due to the activities of lower-income residents. Ms. Snyder agreed. The Gap, Banana Republic, Coach or Men's Wearhouse, she said, might be safer options.

"I think Hermes is selling ties and that's about it," she said.

Broker Debra Pinto, with Wohlfarth & Associates, was surprised to see luxury retailers already in the neighborhood. "I didn't think there would be good retail down here," she said. "I was thinking more middle-of-the-road."

As a three-piece band played Herbie Hancock funk, waiters maneuvered trays of ours d'oeuvres: duck prosciutto with apricot, breaded mozzarella with basil, Italian dried sausage, baked cheese puffs, cupcakes and mini carrots. An air conditioner's hum competed with the band, recalling the World Cup's vuvuzela horn. To the ear of Kipton Cronkite, the entrepreneur whose gallery KiptonART is the current tenant of 75 Wall's ground floor, the AC sounded like a "freight train."

Mr. Cronkite's organization hung "Jupiter Mission" and the rest of the art that spans the room's walls. He said he's excited to be operating a gallery in the Financial District.

"We really wanted to re-energize the Financial District by bringing art to the community," he said. "There's a negative perception of the financial community. We want to get people to come down here."

He and Winick both. Broker Elizabeth Rueckerl-Betteil, with New York Commercial Real Estate Services, thought a fancy restaurant would be the best tenant for the space. Serving lunch rather than retail goods, she said, was the best way to take advantage of the wealthy daytime population.

"The neighborhood warrants it," she said. "You could put a Subway in here, but it wouldn't do it justice."

Winick broker Darrell Rubens, who co-hosted the party with Ms. Shinn, said he has high-end retailers interested in the space, but he wouldn't say who. As Mr. Rubens chatted with The Observer, Newmark Knight Frank broker Gregg Gropper joined the conversation. Mr. Rubens playfully ridiculed his friend for not having shaved for the event.

"I'm not even wearing a suit," Mr. Gropper said, tugging a pastel polo shirt.

He told Mr. Rubens he had hoped to grab a Bud Light at the party.

"That's not happening," Mr. Rubens said. "You could get a glass of champagne."

walden@observer.com

People's Revolution publicist Kelly Cutrone has signed an eight-episode deal with Bravo for a reality show. [Page Six] 

Among the new victims of Bernie Madoff's schemes: Theory president and co-founder Andrew Rosen, Fur Vault Inc. founder Fred Schwartz, and gallery owner Barbara Gladstone. [WWD]  

PETA is urging celebrities to boycott Armani while choosing their Oscars wardrobe because Giorgio Armani has broken his promise to the organization that he would no longer use fur in his collections. [Vogue UK] 

Hermes International said that "robust" holiday sales brought its fourth quarter revenues up by 6.2 percent to 540.9 million euros, or $713.4 million. [WWD] 

Jeremy Scott will design a collection of apparel and footwear for Adidas; it will go on sale February 1. [WWD] 

From Milan: Dolce & Gabbana showed brocade jackets with structured shoulders; Matthew Williamson's final collection for Pucci was heavy in yellows and purples, and towering heels which made several models fall down. Meanwhile, the Versace collection was heavy in reptile skins and gold hues. [Vogue UK]

Manolo Blahnik appreciates a woman who can walk in flats. [Vogue UK]  

Despite the financial downturn, Dolce & Gabbana reported a spike in sales. [WWD]   

“Isn’t this a cool tie?” gushed an eager saleswoman at the chic Hermès boutique at 15 Broad Street, conveniently across from the New York Stock Exchange.

It was a lustrous, sky-blue tie, made of 100 percent silk, with undulating aqua-colored oval shapes and tiny gray floral patterns. (And it would just look great with my jacket, she added.)

This tie was something unique, she explained, the only one of its kind across the entire 4,000-square-foot selling floor.

Turned out someone else had returned it earlier that day for a refund. Store policy: “[R]efunds are given as merchandise credits only, provided the merchandise is returned in its original condition, with proof of purchase and within 10 days of date of sale.”

Store credit—heck, any credit—sounded pretty good amid the meltdown on Wall Street last week.

“Here, try it on,” she said.

There were more pigeons (two) perched above the hallowed Hermès sign out front than customers (me) browsing the posh shop around 2 that afternoon, Sept. 17.

The swanky store had all the hustle and bustle of a Capitol Hill luncheonette in August, with rather bored-looking, albeit dapperly dressed, salespeople quietly minding the store: some of them folding, unfolding and refolding silk scarves; others just quietly chatting en francais in the back. One guy with a clipboard was walking around, taking inventory.

WHEN IT FIRST opened last year, Hermès sparked a lot of excitement.

The first super-high-end retailer to move into the once decimated Financial District in decades, it was heralded as ushering in a new era in downtown commerce, prompting other prominent luxury brands, including Canali, Tiffany and Thomas Pink, to similarly set up shop in the neighborhood.

Retail rents reportedly soared up to 200 percent in the surrounding area.

The Real Estate Board of New York dubbed it “the deal that Most Significantly Benefits Manhattan” for 2007.

It was a revolutionary deal for Hermès, as well. The 171-year-old French company took advantage of the unique location, cast aside its traditionally feminine storefront displays of silk scarves and elegant handbags, and instead put the spotlight on men’s wear.

An entire wall of Hermès ties, perhaps the most coveted (and expensive, starting at $170 a piece) neckwear in the world, in a multitude of colors, geometric patterns and virtually any animal prints you can think of—dolphins, elephants, lizards, monkeys, kittens, even winged reindeer—was placed front and center, just inside the entrance, in a glaring attempt to catch the eyes of passing finance guys with ego to boost and money to burn.

Robert Chavez, president of Hermès USA, claimed immediate success upon the store’s unveiling in June 2007, proudly boasting to men’s fashion magazine DNR that the initial crowds stood “two deep at the tie wall.”

“I mean, why didn’t they think of that earlier?” one prominent downtown developer recently remarked to The Observer. “Every banker wants a Hermès tie.”

That was before the Sept. 15 collapse of venerable investment firm Lehman Brothers, of course, when scores of bankers—a full body count yet to be tallied—suddenly faced unemployment. That, coupled with the fire sale of Merrill Lynch and teetering condition of enormous insurer A.I.G. (and lingering memories of Bear Stearns’ March implosion), sent the Dow plunging more than 500 points.

The ripple effects were felt almost immediately across the street.

For two straight days, no one seemed to care about fancy neckwear, as throngs of reporters and TV crews piled into the pedestrian plaza outside to cover the economic carnage.

But by Wednesday, Sept. 17, “the vibe had changed,” according to the hustling saleswoman at Hermès.

The night before, the federal government announced an $85 billion bailout plan to rescue ailing A.I.G., and consumer confidence seemed to be returning. The Dow finished up 161 points. In the morning, she even sold a few customers some ties, adding, however, “I don’t know if they were bankers.”

“Maybe to hang themselves,” quipped Karen Hippner of Howard Beach, who stopped by Hermès later that afternoon as the Dow reversed course yet again, sinking 449 points by the close of business.

“I could have told you the housing market was going to tank a year ago,” said Ms. Hippner, who works at a nearby law firm. She turned to colleague and shopping companion Carolyn Ward: “Remember the case we worked on with the overinflated broker prices?”

“I kind of went off on these guys last night,” said Ms. Ward, who lives in Williamsburg. “This guy that I went to college with and his friends. What do they do? Private equity, hedge funds, whatever. I was just like, ‘Good job, guys.’”

The pair had come to Hermès that afternoon to browse the store’s collection of designer horse saddles, not ties.

“I saw some dude fondling his new tie the other day on Broadway,” noted Ms. Ward. “Except he had taken it out of a Century 21 bag! Sign of the times.”

OVER THE NEXT several days, I periodically dropped by Hermès to check on the status of the volatile tie market, oftentimes as the only potential customer. Occasionally, others would stroll into the store, look around briefly and then exit. Rarely would someone walk out with one of the store’s trademark orange shopping bags.

For nearly a half-hour last Thursday afternoon, an employee with a stepladder cleaned out the crevices of the storefront’s ornate metallic door frame, without having to stand aside for a single patron.

The store always seemed busiest when stocks were rallying across the street—an observation echoed by the company CEO, Mr. Chavez, in an appearance on CNBC’s Squawk Box last November.

“Sometimes if he can’t get time to read about the market, he’ll go down to the Wall Street store during the lunch hour, and if the store is busy, then he’ll know that the market’s doing well,” noted Bernice Kwok-Gabel, a spokeswoman for Hermès USA. “But if it’s quiet during lunchtime, he knows the market’s not doing well.”

Hermès’ foot traffic isn’t always an accurate indicator of the broader economy.

Just before the closing bell last Thursday, as the Dow edged up some 400 points on the day, a balding guy in a pinstriped suit and leather briefcase—the spitting image of Hermès’ target demographic—came hustling down the sidewalk past the storefront. For a brief moment, he turned his head to peer inside at the ties, then kept on walking.

Ms. Kwok-Gabel of Hermès described sales at the store as “stable” since Sept. 15.

Displayed prominently throughout the tumultuous week was a sleek black tie emblazoned with an ominous gray storm cloud shedding raindrops.

“It’s called a mood tie,” said Daniel, a tall, handsome Hermès salesman with wavy dark hair and glasses, who added that it was the store’s last piece of cloudy neckwear left. On the back of the tie, he pointed out, was a tiny cartoon character stomping his hat in disgust.

Even amid the week’s dire economic outlook, the symbolically gloomy tie didn’t budge from the rack.

“People are trying to be more optimistic,” noted store manager Linda Mendell around noon on Monday, amid another slow lunch hour at Hermès.

The prophetic neckwear’s alter ego, a navy tie with yellow rays of sunshine, had no takers, either.

And so the economic uncertainty continued, as the Dow dropped yet another 372 points that afternoon.

Even less chichi tie-sellers were feeling the financial impact.

Hawking purported designer ties, with labels including Bill Blass and Perry Ellis, for just $1 to $2 apiece, sidewalk vendor Felix Jones described business as “slow” shortly after the closing bell on Monday.

“At this time, I usually have $200 to $300—I’m only at $75,” he said. “It’s usually a swamp of people out here. Not now.”

cshott@observer.com

Karl Lagerfeld will help out with two Coco Chanel films currently in the works. He will work with the costumer for Chanel et Stravinsky and supervise the re-creation of costumes for Coco Avant Chanel, starring Audrey Tautou. [Fashionologie]

Burberry is continuing its U.S. expansion by opening its first U.S. children's store on November 7 at The Westchester mall in White Plains. [Vogue UK]

Style.com is introducing an iPhone feature that will allow fashionphiles to view runway shows on their phones, hours after they happen. [NY Times]

Luxury retail firms Gucci and Hermes seem to be benefiting from the recession. [Guardian]

This fall, expect to see beading, embroidery, ruffles, and sequins. [The Independent]

Phillips de Pury & Co. will auction off 50 pieces of jewelry worn by 50 Cent, Biz Markie, MC Lyte, Kanye West, Notorious B.I.G and Tupac Shakur in an auction called "Hip Hop's Crown Jewels." [FWD]

Mr. Blackwell has regained consciousness; the 85-year-old fashion arbiter is still hospitalized and battling an infection. [Yahoo]

MTV will host its own version of a modeling reality show that will include fitness training that will help models get down to their "ideal size." [The Cut]

Victoria Beckham will not bring her collection to Bryant Park this September. [FWD]

Matthew Mellon's new girlfriend, Nicole Hanley, may replace his ex Noelle Reno at Degrees of Freedom, Mellon's fashion company. [NY Post]

Surprisingly, gains were felt on both sides of the Atlantic, with U.S. sales rising 23 percent annually in the first quarter. Even more suprising is that the banner performance of Hermès’ Wall Street branch drove up the numbers, WWD reports.

There must be quite a few ladies out there who got a new Kelly bag at bonus time because leather handbag sales jumped 25 percent.

Among the 20 new international Hermès stores planned for 2008 are two new U.S. branches, further evidence that luxury brands are flying in the face of the prevailing economic winds.