To be continued today… Hermes
(AOF) – Hermès announced the opening of a new store on Sunday, January 8, 2023 in Nanjing, Jiangsu Province. This location—one of the house’s twenty-seven locations in mainland China—opened in 2010 in the Deji Plaza shopping center in Xinjiekou District. Its relocation to a larger location, spread over two levels, shows the luxury group’s confidence in the Chinese market. The sales area presents sixteen professions of the house.
AOF – DETAILS
Key points
– a medium-sized luxury family group founded in 1837, but with a worldwide reputation, with 306 exclusive stores and an e-commerce platform in 28 countries;
– 6.4 billion euros in sales, 60% divided between Asia-Pacific, including 11% Japan, 24% Europe, 9% France and 16% America;
– Leather goods (47% of sales), clothing and accessories (25%), including silk and textiles (6%), perfume (4%), watches (4%), tableware, etc.;
– A business model based on vertical integration, “hands-on power”, keeping the know-how of 5,600 craftsmen in 51 production sites in France (out of 64 in total) and sharing 3 thirds of the value created. (investments, shareholders, storage);
– A company managed by family shareholders (66.6% of capital and 78.2% of voting rights) with Axel Dumas and Henri-Louis Bauer (Emil Hermès representative) as general partners;
– Sound financial strength with shareholders’ equity of €9.4 billion and net cash of €7.7 billion at the end of June, combined with operational investment retention and shareholder generosity.
Challenges
– Based on a long-term strategy:
– artisanal model of excellence, vertical integration and power of creativity, multi-local dynamics and sustainability through financial autonomy,
– single communication,
– a multi-channel approach with a revenue target of 1 billion euros;
– Innovation strategy specific to the creative profession and positioned in omnichannel with Petit H, Hermès Horizon;
– Environmental strategy:
– 50% reduction and 100% substitution of carbon emissions from its activities by 2030 (compared to 2018) and 3rd commitment to Livelihood carbon funds,
– By 2020, a 50% reduction in carbon emissions from its activities compared to 2018,
– Stop using single-use plastic by 2025,
– quality of raw materials certified by independent third parties (target 100% for leather and textile sectors by 2024);
– repairability at the heart of the design;
– Asia remained in good shape with sales coming from Australia, South Korea, Singapore and Thailand.
– The ability to resist fashions and economic contexts thanks to its “classic” image, timeless character and supply strategy;
– Profitability is due to the weakening of the euro against the dollar, production in France.
Challenges
– Evolution of price differences between Europe and the rest of the world – 50%;
– To meet customers with sales price increases ranging from 5 to 10% depending on the continent in 2023;
– Impact of investments in production capacities – 5 new leather goods stores in France and work in the Textile Lyonnais area, as well as in the distribution network – multi-channel services and store openings;
– Confirmation of medium-term goals of “increasing turnover with an ambitious fixed exchange rate” after a 32.5% increase in activity at the end of September, which exceeded market forecasts.
Learn more about the luxury sector
A few more years of market boom
According to Bain & Company, the global luxury market (fashion, cars, hotels, wines and spirits, cruises, etc.) will register a 21% increase in sales in 2022, reaching 1.384 billion euros. The luxury personal goods segment (jewellery, clothing, watches, leather goods, etc.) should grow by 22% and again by 3% to 8% in 2023, despite the expected economic slowdown. By 2030, the growth will reach 60% and should continue in the following years! American spending in Europe more than doubled between 2019 and 2022, according to Bain. This development is mainly explained by the strong dollar. On the other hand, the Chinese market is at half-mast due to the “zero Covid” policy and strict lockdowns.
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