Hermès reports 23% jump in sales as super-rich continue to spend big
Hermès, the maker of £5,000-plus Birkin and Kelly handbags, has reported a 23% jump in sales in the first three months of the year, becoming the latest luxury goods company to benefit from wealthy shoppers spending big despite the cost of living crisis.
Eric du Halgouët, Hermès’s finance director, said the French company was benefiting from “very dynamic traffic” into its stores particularly in Asia, which was “driven by a very good Chinese new year”, as well as Italy and the UK where “increase in tourist flows” helped lift overall quarterly sales to €3.4bn (£3bn).
The company said demand for its expensive leather handbags was so strong it is opening a string of “artisan” factories to ramp up production. Last week it opened a new facility in Louviers, Normandy, employing 140 leather workers making its 25cm Kelly bag, and plans to double the size of its workforce within four years.
Each Kelly bag, which was renamed after the Hollywood legend Grace Kelly in the 1950s when she was photographed holding the bag over her belly to conceal early signs of pregnancy, takes between 14 and 20 hours to make and is produced by a single dedicated leather worker.
The Birkin is named after the actor and singer Jane Birkin, who the then Hermès chief executive, Jean-Louis Dumas, sat next to in the first-class compartment of a Paris to London flight in 1983. As she placed her straw travel bag into the overhead bin the contents fell out on to the floor of the plane, leaving her and Dumas to scrabble around picking them up.
She explained to him she was having trouble finding a leather bag big enough for everything a young mother needed to carry. A year later Hermès debuted the large Birkin bag and she was given a personalised bag free of charge. In 2011 she sold her original, well-worn bag for $162,000 at auction to support the relief effort for the Japan tsunami.
The bags have become must-have collectibles for the super-rich and celebrities, including Victoria Beckham, Katie Holmes, Rita Ora and Kelly Brook. Beckham’s collection of more than 100 Birkins, including a £100,000 shocking pink version, is said to be worth more than £1.5m.
Rare Hermès bags have also proved extremely popular at auction, with some selling for almost £300,000.
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The company is also building new factories at Sormonne, in the north-east, and Riom, central France, which are slated to open next year as it aims to increase leather goods production by 7%.
Hermès’s chief executive, Axel Dumas, said the new factories were taking time to come online as its best leather workers had been taken away to help train new staff. “Training takes time,” he said at the opening of the Louviers factory. “We take our best artisans, and they become trainers, so they’re no longer in production.”
The company has also opened a dedicatedleather-working school to train more craftspeople in the art of handbag making. The Hermès school of craftsmanship, which has been certified by the French ministry of education, now has more than 450 people enrolled in leather goods apprenticeship programmes in workshops throughout France.
Hermès already employs more than 4,000 leather workers and is hiring more than 200 each year.
The company, founded in 1837 by the horse harnesses and saddle maker Thierry Hermès, has seen its share price jump more than 50% so far this year to €1,963, giving it a market value of more than €200bn. Earlier this year it gave all of its 19,700 employees a €4,000 bonus in recognition of its success.
Hermès is still majority-owned by descendants of Thierry Hermès, including Axel Dumas, a sixth-generation member of the family. The Dumas family’s fortune is estimated at about $96bn (£77bn), making them the fifth richest family in the world, according to the Bloomberg billionaires index. His cousin Pierre-Alexis Dumas is the company’s artistic director.
Luca Solca, an analyst at Bernstein, said the performance “confirms Hermes’s superior ability to plough through adverse demand trends, leveraging its high brand desirability and waiting lists for iconic products”.
He added: “Higher-end exposure to richer consumers is probably also helping.”
Earlier this week LVMH, the luxury goods empire of the world’s richest person, Bernard Arnault, reported a 17% increase in first quarter sales to €21bn.
It helped push shares in the group, which owns Louis Vuitton, Christian Dior and Moët & Chandon champagne, to a record high of €890 – valuing the company at €447bn. That makes it the most valuable company in Europe and the 10th most valuable in the world.
