In the Bag: How Hermes Beats the Recession

That's for sure. Prices for a Birkin bag, the company's flagship purse, made from leather, start around $7,500. Bags from more exotic skins can sell for prices into the six figures. The bags were named for British singer and actress Jane Birkin.

"The price is above and beyond everyone else," says Michael Tonello, author of "Bringing Home the Birkin," who spent six years circumventing Hermes' years-long waiting lists to get bags to wealthy clients when they wanted them.

"The people who can afford these goods are not affected by the recession," Tonello says. "Even if they lost millions of dollars in the market, they are still worth hundreds of millions of dollars. If you want something super special, if you want a handmade crocodile bag and you can afford it, Hermes is the only place you'll go."

"That's why," he says, "the brand is recession-proof."

The handbags, unlike some of Hermes less-expensive goods, such as perfume and watches, are sold exclusively through company-owned shops.

Sales of those goods, reliant on both middle-class customers and middleman retailers, were down in the first quarter.

The company's perfume sales fell 28.7 percent while watches fell 29.5 percent.

"Fragrances and watches are dominated by the wholesale distribution channel and are suffering the trends of everyone else given the credit crunch. Many of the third-party [vendors] have cut back on orders," says Di Pasquantonio.

"Handbags are produced in limited quantities. The handbags and silks are sold through company owned retails stores, which means they are not being hurt by middlemen. They have a direct relationship with the customer," she says.

Those cheaper goods, Tonello calls "aspirational merchandise for the middle class."

"These are goods for people whose spending is actually affected by the recession," he says.

The importance of handbags to the company -- particularly expensive exotic leathers like crocodile -- has led Hermes to farm its own animals in Australia.

Leather goods make up 40 percent of the company's profits.

"It can take three to four crocodiles to make one of our bags so we are now breeding our own crocodiles on our own farms, mainly in Australia," Patrick Thomas told Reuters at its Global Luxury Summit in Paris.

The company is also looking to train new craftsmen to add to the 1,400 currently employed by the company.

"We cannot face demand. We have massive over-demand. We are limited by our ability to train new craftsmen," Thomas says.

The Hermes bag has become a cultural touchstone. The Birkin bag was featured in an episode of the HBO series "Sex and the City." And the Kelly bag was used as a plot device in the 2003 film "Le Divorce." Numerous celebrities have been photographed toting Hermes bags, including singer Victoria Beckham, who reportedly owns $2 million worth of Birkin bags.

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