The fashion pack has always known an Hermes handbag is a good investment, but the clamor to invest in the exclusive French handbag-maker has given it a new wow factor: The super-luxury group is now valued far more highly than France’s second biggest bank, Societe Generale (SocGen).
The firm behind the famous Kelly and Birkin bags, which cost more than a car, and Queen Elizabeth II’s favorite headscarves, is now valued at more than 28 billion euros (US$39.76 billion) on the Paris stock exchange, while SocGen is worth 18 billion euros. The disparity means the nimble fingers of an Hermes artisan, who spends up to 24 hours painstakingly stitching a bag with one long waxed thread, are valued 30 times higher than the moneymaking brainpower of a SocGen banker.
“It is extremely demanding to turn 700-odd bits of leather into a useful bag,” says Pierre-Yves Gauthier, head of research at AlphaValue, who says that with a fraction of SocGen’s staff and turnover, Hermes’s market capitalization equates to 3.3 million euros per employee.
Photo: AFP
Luxury goods sales have bounced back from the financial crisis thanks to the growing ranks of the super-rich in emerging markets such as China. Last week, Hermes said its sales jumped 22 percent to 1.3 billion euros in the first six months of the year as consumers in important markets such as the US, which were battered by the recession, rediscovered their taste for the finer things in life.
Such is the demand for the firm’s coveted handbags that CEO Patrick Thomas warned of a shortage that would stifle sales in the coming months.
“We can only make so many bags,” he said, adding that Hermes had hired 400 new staff to raise production of leather goods by nearly 10 percent.
With 174 years of experience under its buttery leather belt — and still 73 percent owned by about 60 members of the sprawling founding family — luxury experts put Hermes in a class of its own.
Thomas told one interviewer recently: “We try to do poetry and we get excellent economic results.”
That poetry comes at a price: The Birkin bag, named after singer Jane Birkin, starts at £5,400 (US$8,700), but can cost as much as £100,000 in exotic skins such as saltwater crocodile.
In the company’s main workshop in the Paris suburb of Pantin, time has stood still. There, 340 craftsmen and women spend 18 to 24 hours hand sewing each bag. Only the zipper and inside pocket are finished by machine. Orders can be delayed for several years as the company scours the globe for the right color of crocodile.
Harrods managing director Michael Ward says the waiting list is “the new VIP pass” and after what can be an 18-month wait for a Birkin, the store performs an “opening ceremony” when the box arrives: “The last person to touch the bag was the artisan and when [the customer] opens the box she is the next one to touch it.”
Maria Eugenia Giron, a professor at Madrid’s IE business school and author of Inside Luxury, says customers will pay for expert craftsmanship that has been passed down through six generations of the business, founded in 1837 by Thierry Hermes, a French harness-maker who supplied royal houses throughout Europe.
“Hermes has the magic combination of tangible and intangible brand values,” Giron says.
The craft skills make its handbags unique, but there is stardust sprinkled on products such as the Kelly, named after Grace Kelly, the princess famed for her style and beauty, she says.
Giron says Hermes has never made sunglasses because it does not believe it has the rigorous level of manufacturing expertise that would enable it to make “unique, authentic products.” The material for its famous colored scarves is woven in Lyon from silk raised on its own farm in the mountains of Brazil and the fragrance Un Jardin sur le Toit, launched this year, was concocted by Hermes’ perfumier in Grasse, the world’s perfume capital in the south of France.
Pierre Mallevays, a former head of mergers and acquisitions at LVMH, who now runs boutique advisory firm Savigny Partners, says much of Hermes’ current success is down to the “brand vision” of Jean-Louis Dumas, who took the helm in the late 1970s. Dumas relaunched the Kelly in bright colors and introduced the bigger Birkin after a chance meeting with the actress on a Paris to London flight. Birkin told him her Kelly bag was not big enough.
“Hermes owns that unique ‘artisan’ space where it can charge a fortune based on the perception that its products are the ultimate degree in craftsmanship and use of the best materials,” Mallevays says.
Hermes shares are up 70 percent this year, closing on Friday at about 270 euros, turbocharged by the unexpected — and unwanted — arrival of the predatory LVMH luxury group on its shareholder register. The group, overseen by Bernard Arnault, France’s richest man, has snapped up a 21 percent stake in Hermes, saying its intentions are friendly.
The Hermes family and Thomas are determined to retain the company’s independence, with the latter memorably telling a press conference this year that: “If you want to seduce a beautiful woman, you don’t start by raping her from behind.”
Rather more politely, the company has said of LVMH: “[There is] an intruder in the garden, but we don’t want him in the house.”
A merger, Thomas added recently, would “kill” Hermes.
“You would keep the brand and keep the name, but Hermes would be dead,” he said.
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
MAJOR DROP: CEO Tim Cook, who is visiting Hanoi, pledged the firm was committed to Vietnam after its smartphone shipments declined 9.6% annually in the first quarter Apple Inc yesterday said it would increase spending on suppliers in Vietnam, a key production hub, as CEO Tim Cook arrived in the country for a two-day visit. The iPhone maker announced the news in a statement on its Web site, but gave no details of how much it would spend or where the money would go. Cook is expected to meet programmers, content creators and students during his visit, online newspaper VnExpress reported. The visit comes as US President Joe Biden’s administration seeks to ramp up Vietnam’s role in the global tech supply chain to reduce the US’ dependence on China. Images on
New apartments in Taiwan’s major cities are getting smaller, while old apartments are increasingly occupied by older people, many of whom live alone, government data showed. The phenomenon has to do with sharpening unaffordable property prices and an aging population, property brokers said. Apartments with one bedroom that are two years old or older have gained a noticeable presence in the nation’s six special municipalities as well as Hsinchu county and city in the past five years, Evertrust Rehouse Co (永慶房產集團) found, citing data from the government’s real-price transaction platform. In Taipei, apartments with one bedroom accounted for 19 percent of deals last
RECORD-BREAKING: TSMC’s net profit last quarter beat market expectations by expanding 8.9% and it was the best first-quarter profit in the chipmaker’s history Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which counts Nvidia Corp as a key customer, yesterday said that artificial intelligence (AI) server chip revenue is set to more than double this year from last year amid rising demand. The chipmaker expects the growth momentum to continue in the next five years with an annual compound growth rate of 50 percent, TSMC chief executive officer C.C. Wei (魏哲家) told investors yesterday. By 2028, AI chips’ contribution to revenue would climb to about 20 percent from a percentage in the low teens, Wei said. “Almost all the AI innovators are working with TSMC to address the