Article: Hermes Drifting?

Yet another article by someone who doesn't know what they are talking about! :rolleyes:

Hermes have been selling those so called "low price" items for years, no, for decades! Hermes is not a luxury handbag maker, Hermes is a life style concept. Hence they produce a very large range of products for a very wide range of usage in every day life.

Thanks.. I do Agree with your input...
 
  • Like
Reactions: prepster
I have original Hermes advertising posters from inner war years when they issued their first ever silk scarf. I am away from home and don't recall the exact year, but it's either 1939 or 1941 or something like that. I have several posters from the same era and items advertised in those including watches, agenda covers, scarves etc. So how is that Hermes "drifting" with "cheaper" products in recent years?
 
Last edited:
At first glance, I disagree with your earlier comment. Hermes is a publicly traded company (Euronext RMS) and has been for a while. Similar to what any other public company does, they have investor calls and presentations, either to the public or in private with key shareholders, to discuss strategy and plans for growth.

Also, Exane BNP Paribas is a joint venture between Exane and BNP Paribas. I don't know too much about Exane, but BNP is one of the top 3 investment banks in France. I haven't heard of this Luca Solca person, but my first impression is that he can't be an idiot if he's had a lengthy career at many top name firms.

Now granted, I think a few of his comments in the article are rather near-sighted. A simple Google search will show that GPs and Picos are much more than he thinks, but anecdotes on even this forum will show that it's much easier to be shown a Birkin as a man than a woman. However, I believe the majority of his article is correct. People who buy H scarves are either silk aficionados or people who want an "entry level" H item, but H has marketed itself so well that both group of clients walk away feeling pleased with their purchases. Also, for this second group of people, there's a business opportunity for H to start graduating them from accessories to more lucrative sales.

I do appreciate his hypothetical comparison to another large French luxury retailer. If H goods were as easy to find in every H store as Vuitton's are, would there be the same level obsession? For me, probably not. Half the fun for me when shopping at H is never knowing what I'll find in a store and the excitement of tracking down an item or colorway.

While Hermes is a traded company, after the attempts by LVMH to mount a hostile takeover a few years ago their shares are primarily owned by an assortment of family interests and they bought back most of the freely traded shares. It's not quite the same as a large publicly traded US corporation. Hermes remains very much governed and directed by the descendants of the founding family so they are not beholden to the same type of shareholder expectations.

It doesn't seem like a very well researched article however.
 
While Hermes is a traded company, after the attempts by LVMH to mount a hostile takeover a few years ago their shares are primarily owned by an assortment of family interests and they bought back most of the freely traded shares. It's not quite the same as a large publicly traded US corporation. Hermes remains very much governed and directed by the descendants of the founding family so they are not beholden to the same type of shareholder expectations.

It doesn't seem like a very well researched article however.
I completely agree with what you said. However, I only mention the public aspect of Hermes to point out that like any other SA company, they are obligated to publicly report certain financial disclosures and forward looking statements. You're right, it's not the same as a US S- or C- corporation, but given how they still have a significant percentage of shares on free float, even I was able to track down their latest investor presentations and annual reports with minimal research. I also think it's safe to assume that professional equity research analysts (who likely also get face time with H's IR team) would be able to find more information than I can.
 
  • Like
Reactions: prepster
What is most unique about Hermès is the company’s decision to frustrate consumer demand, making it difficult for people to buy its most coveted products.

No, what's most unique about H is its quality. Sadly, this gets less airtime than the famous "frustrated demand." If H ever begins to cut back on quality, believing that only consumer frustration keeps them at the top, I believe its core customers will leave like rats leaving a sinking ship. Personally, I don't buy H because its hard to get. I buy it because I want the best and I can afford to have it. When H stops being the best, I'll stop buying it.

Better still is Hermès’ skill at conjuring a halo of exclusivity over its wide range of other products, no matter how trivial they are. Fragrances that sell for $100 a bottle...

What a ridiculous statement. Very few fine fragrances sell for less than $100 a bottle. Tom Ford, Valentino, Chanel, Creed, Guerlain, Byredo, Kilian, Le Labo, Armani, Houbigant, etc....For heaven's sake... Tory Burch is $115, and I wouldn't consider that company to be "conjuring a halo of exclusivity" over it's products. The fact is, growing natural ingredients for fine fragrances is getting more expensive. It takes something like 4 tons of roses to make just 1 Kg of rose oil.

Demand frustration and category segregation were the two traits that set Hermès apart from its luxury megabrand peers.

Again, what "sets Hermes apart from it's luxury megabrand peers" is quality. IMHO the demand frustration stuff is a risky game, as it can open the door to other high-quality leather goods makers to take away market share. People get really peculiar about over-hyped products that they cannot buy--if they can find an alternative, sometimes they just leave. Which is probably a concern, and why H is making more products available as they are able to do so. I suspect that H also sees that long lines and chaos in its flagship store, and frustrated buyers in boutiques does not make H more appealing to its core luxury customer or uphold the image that they want.
 
No, what's most unique about H is its quality. Sadly, this gets less airtime than the famous "frustrated demand." If H ever begins to cut back on quality, believing that only consumer frustration keeps them at the top, I believe its core customers will leave like rats leaving a sinking ship. Personally, I don't buy H because its hard to get. I buy it because I want the best and I can afford to have it. When H stops being the best, I'll stop buying it.



What a ridiculous statement. Very few fine fragrances sell for less than $100 a bottle. Tom Ford, Valentino, Chanel, Creed, Guerlain, Byredo, Kilian, Le Labo, Armani, Houbigant, etc....For heaven's sake... Tory Burch is $115, and I wouldn't consider that company to be "conjuring a halo of exclusivity" over it's products. The fact is, growing natural ingredients for fine fragrances is getting more expensive. It takes something like 4 tons of roses to make just 1 Kg of rose oil.



Again, what "sets Hermes apart from it's luxury megabrand peers" is quality. IMHO the demand frustration stuff is a risky game, as it can open the door to other high-quality leather goods makers to take away market share. People get really peculiar about over-hyped products that they cannot buy--if they can find an alternative, sometimes they just leave. Which is probably a concern, and why H is making more products available as they are able to do so. I suspect that H also sees that long lines and chaos in its flagship store, and frustrated buyers in boutiques does not make H more appealing to its core luxury customer or uphold the image that they want.
Spot on Prepster. See many long-time H clients quietly slinking away to Delvaux and Moynat. Quality, availability, service, and no attitude!
 
  • Like
Reactions: prepster
I completely agree with what you said. However, I only mention the public aspect of Hermes to point out that like any other SA company, they are obligated to publicly report certain financial disclosures and forward looking statements. You're right, it's not the same as a US S- or C- corporation, but given how they still have a significant percentage of shares on free float, even I was able to track down their latest investor presentations and annual reports with minimal research. I also think it's safe to assume that professional equity research analysts (who likely also get face time with H's IR team) would be able to find more information than I can.

I looked up their 2015 annual report last night, just out of curiosity. It was by far the most enjoyable annual report I've ever read, lol! Pictures and H history galore.
 
Luca Solca is touted as a "luxury brand guru" and "the world's number one luxury goods analyst". I was more interested in the fact that no replies are made to any of the comments to his articles or the other articles on BoF. No follow-ups. This is throwaway style news because the website does not need to be responsible for or defend whatever they put out, which unfortunately tends to be the norm for a lot of sites.
 
Luca Solca is touted as a "luxury brand guru" and "the world's number one luxury goods analyst". I was more interested in the fact that no replies are made to any of the comments to his articles or the other articles on BoF. No follow-ups. This is throwaway style news because the website does not need to be responsible for or defend whatever they put out, which unfortunately tends to be the norm for a lot of sites.
Yes, I'm a BoF subscriber and I have been really disappointed by their guest articles. Amazing how little homework it takes to be an "expert".
This writer is the same analyst who estimated the production cost of a leather Birkin at under $800, which I still think is a bit low (although in line with standard luxury markup of about 13x).
 
What a strange article. He is factually incorrect about both the price points and the timing of introduction for Evelyn, GP, Pico etc. One would expect more considering he is supposed to be a luxury goods analyst.

He is correct to say Hermes is brilliant at the games of psychology. But who doesn't already know this, lol!
not very impressed with his skills.
 
  • Like
Reactions: Mali_