THE POPE OF FASHION

By MARTHA DUFFY/PARIS

The Fall ready-to-wear shows in Paris, the most important bazaar on the fashion calendar, were in full crush. At Dior, house of the very hot designer John Galliano, the props indicated that the young maestro had been thinking hard about a dreamland Orient. As the crowds tripped around the delicate bridge to nowhere on their way to find or steal seats, one conservatively dressed businessman waited quietly in the shadows. Galliano may get the attention, but, murmured Bernard Arnault, "I have all the fun."

He also has all the power. His control of the French conglomerate LVMH Moet Hennessy Louis Vuitton has made him the king of luxury goods. Over the past decade or so, Arnault has put particular energy into high-end fashion, acquiring the houses of Dior, Christian Lacroix, Givenchy and Kenzo. If you've already made your first few billion, it is a dream kingdom. Lately, the irreverent Women's Wear Daily is calling him the Pope of Fashion.

Yet neither the French business community nor the fashion flock sees this pope as infallible. Arnault's American-style takeover battles have rankled France's conservative business cardinals. And his appointment of Brits to run Dior and Givenchy--not to mention his sacking of the revered Hubert de Givenchy, the man who immortalized Audrey Hepburn--shocked the French, who, with some justification, see their nation's fashion sense as chic in a way that cannot be duplicated by a couple of rostbifs.

John Galliano, 36, a cheeky Spaniard brought up in London, was the toast of the SoHo fashion scene but unknown on the Avenue Montaigne when he took over Givenchy two years ago. A year later, Arnault moved him to Dior and plucked Alexander McQueen--even cheekier and younger, at 27--to guide the fortunes of Givenchy. At Louis Vuitton, a maker of fancy luggage and handbags that dates to 1854, he has hired an American, the young sportswear designer Marc Jacobs, to create a line of bags and sportswear to take on the chic of Gucci and Prada. Jacobs should give Vuitton a high and profitable fashion profile--what he was hired to do--stepping into a company whose business is up 54% since it became part of LVMH. Last week Jacobs showed his own line of American classics with lots of cashmere and flannel--a sort of '90s Halston.

It is all a huge gamble. But Arnault, 48, savors this kind of contrariness like one of his champagnes. "I'm not interested in anything else but the youngest, the brightest and the very, very talented," he says. And the very, very profitable. Arnault has managed, and that is the word, to coax money from top-shelf businesses. Last year LVMH earned $649 million on sales of $5.4 billion. Says he: "I have always been interested in two things: the arts and business."

He is known as a tough boss; if he indulges the Gallianos on the creative side, he is whipping the production side, taking advantage of all the available back-room synergies in manufacturing and distribution. For instance, Lacroix's Bazar line is manufactured by Kenzo; Jungle, Kenzo's perfume, is made by the Givenchy factory; and Vuitton's first perfume is being concocted by Guerlain, another LVMH firm. The principle is to control costs rigorously, then spend a fortune on advertising.

Many progressive Frenchmen would dearly like to see more business leaders like Arnault. Born in Roubaix, in northern France, he graduated from Paris' elite Ecole Polytechnique with a degree in engineering. Perhaps because of their rigid educational system, the French tend to produce civil servants and middle managers, but entrepreneurial brains who would enliven the business climate are few. The success of Arnault, who spent three years working on real estate deals in Florida during the Socialist reign of Francois Mitterrand, has stirred up resentment and distrust among his peers.

To them, Arnault has broken the rules. A former LVMH executive marvels, "He is ferocious, but remarkable in that he realized that he could ignore convention without ill effects to himself. At that time there were things that were not necessarily illegal, but that weren't done. The practices that should have excluded him from the business world in fact made him one of its pillars."

A good deal of this censure has to do with Arnault's "ferocious" approach in acquiring luxury-goods companies, many of which were family owned, by splitting the opposition--that is, stepping in on the side of one of two disagreeing partners and later eliminating the survivor. He did that in 1985, taking over the bankrupt firm of Boussac, which owned Dior. At the time, he promised to expand Boussac and preserve jobs; instead he shut it down, having extracted the part he wanted.

Dior is the jewel in Arnault's crown, and he has entrusted the brash Galliano with polishing it. He says, "I love bringing young talents to the heart of an old house. Galliano has special links to Dior that you can feel: in design, style, romanticism and femininity. Of course, it is sometimes shocking--but fashion means something new."

Galliano's approach has been high drama all the way. For his part, Galliano is terse: "I think long term, and Mr. Arnault is thinking long term with me. He has given this place a complete dusting in the last couple of years"--presumably to make way for the young prince who Arnault believes will be a second Dior.

If the rakish, high-flying Galliano was a shock to the French system, Alexander McQueen was even worse, especially when his first show was a medley of British bad taste. Arnault is unworried: "His shows were original and surprising, full of ideas. It's not easy for a young designer to adjust to this world."

McQueen should have a lot of time to make the adjustment. Christian Lacroix, the most accomplished of the LVMH designers, hasn't earned a sou for LVMH in 10 years. That may change soon; his very young Bazar line is breaking into the black. Lacroix, whose atelier is the only one Arnault started from scratch, is a sharp observer of his boss: "He needs to be convinced in his eye and his mind--it is essential." As to Arnault the businessman, Lacroix echoes the common opinion: "He loves the new, he loves to astonish and to be first with something. If it means clearing the land to make a new garden, then he'll chop away. And he loves a fight."

Arnault is usually depicted as a remote, chilly businessman, and in appearance he has a slightly academic rumple. But people in the design community tell another story, of dinners for 15 or so at the Arnaults' home in the elegant 16th arrondissement. There he relaxes and heads for the piano (favorite composer: Chopin). He calls himself an amateur pianist; he practices twice a week, still learning new pieces. His wife Helene is a concert pianist who has just finished a Canadian tour. "We once gave a concert together," Bernard recalls. "But once was enough--too much work." Mme. Arnault plays a different sort of duet with Bernard; Lacroix believes that often Arnault sees clothing through her eyes. They go shopping together most Saturdays. Where? At the Dior boutique on the Avenue Montaigne.

But when the serene ripples of Chopin fade away, it's back to the clangor of Arnault's other preoccupation, business. At the moment he is involved in a donnybrook with Robert W. Miller, a minority stockholder in the DFS Group Ltd., a duty-free retailer of leather goods and perfume, particularly LVMH's leather goods and perfumes. Arnault thought he had maneuvered around Miller by buying out his partners' 38.75% share for $1.6 billion. But Miller hung tough, declaring that "despite his promises, Bernard Arnault has a pattern of exploiting the assets of partially acquired companies for the benefit of LVMH with no concern for the best interests of minority shareholders." Alas, that's what Miller may become. For now, LVMH has announced it will manage DFS in partnership with him.

Arnault isn't the type to dwell on such incomplete victories. There are other names on his shopping list, including the Paris jeweler Mauboussin, and perhaps Barneys, the bankrupt New York City retailer. The Barneys situation is particularly nasty, with lawsuits flying and all manner of unpleasantries exchanged among Barneys' owners, their landlord and assorted creditors. Yet Barneys remains the most excessively hip retailer in the country. It would seem like a deal tailor-made for the talents of Bernard Arnault.

--With reporting by Dorie Denbigh/Paris

With reporting by Dorie Denbigh/Paris