Riding Hermès to Record Revenue
As Hermès opens its biggest U.S. store to date, family scion and CEO Axel Dumas reveals what makes the brand tick.
“Overall, am I amazed, or can we do better? Is it risky enough?” Axel Dumas, Hermès CEO, says he asks himself during product reviews. Here, Dumas pictured in the saddlery at the Hermès headquarters in Paris.
By Alexandra Marshall | Photography by Hugues Laurent for WSJ. Magazine
Sept. 15, 2022 8:30 am ET
Back when Axel Dumas was in charge of retail operations for
Hermès in France, starting in 2005, one of his tasks was to pay a visit to all the company’s stores. “My goal was never to get the address [before I went],” says Dumas, now CEO of the family-owned brand, which was founded in 1837, six generations of his family ago. “My theory was that if we have the right location, I’ll be able to find it by feeling.” He’d go to the center of whichever town was on his list that day and follow his nose, which is aquiline and adds to the resemblance he bears to François Truffaut’s New Wave muse Jean-Pierre Léaud. “I’d look for a nice area, where people were working. It was easy.”
The brick-and-mortar shopping scene has been panicky for years, as e-commerce nibbles at its foundations, malls crater and department stores try to dig themselves out of bankruptcy. Stores are boring, the conventional wisdom says. Multinationals like the Gap and Sephora roll out techy gimmicks like VR dressing rooms and virtual makeup assistants. If there is a buoy of good news bobbing above a pessimistic industry surface, it is Hermès’s orange box. Since the middle of the 2010s, as headlines have trumpeted “the retail apocalypse,” and as the fast-approaching metaverse threatens to become a dematerialized shopping mall, Hermès has leaned into physical stores.
Via teleconference, his suit jacket buttoned while Paris emerges from a heat wave, Dumas laughs when I tell him that I’ve been barraged by logo-stamped press releases of renovations and openings. To name but a few in the past two years, there are new boutiques in Osaka; Stockholm; Madrid; Austin, Texas; and Doha, Qatar, and expanded ones in Istanbul; Manila; Dailan, China; and Short Hills, New Jersey. A fourth store opened in Florida, while the brand’s international airport presence, which Hermès was early to establish, remains muscular.
Hermès Apple Watch, $1,399, and Hermès scarf, $800, Hermes.com.PHOTO: COURTESY OF HERMES
“You’d be surprised to know that when I joined [as CEO in 2013], we had maybe the same number of stores,” Dumas says. “I think we’re even down six. What we’ve done is to open bigger ones in better places, where we can show all the métiers,” as Hermès calls its 16 product categories, which include saddlery, men’s and women’s ready-to-wear, silk, leather, jewelry, homewares and, most recently, beauty. Even now that Hermès has become a multibillion-dollar company, there is no corporate team dedicated to crunching data before store locations are chosen. “Mostly it’s done by intuition,” says Dumas, 52. “We try to find a location on the sunny side of the street and a complicated building where there is character.”
The splashiest example of its new-old retail logic, and one of its most complicated buildings to date, is Hermès’s new flagship at 706 Madison Avenue in New York City, which broke ground in 2020. It will open its doors in early October. (The current Madison Avenue stores will close.) The structure combines three Upper East Side buildings with landmark facades into one. It was designed with RDAI, the architecture firm founded in 1972 by Rena Dumas, wife of Hermès’s former artistic director and CEO Jean-Louis Dumas and the mother of Hermès’s current artistic director, Pierre-Alexis Dumas (Axel’s first cousin).
Men’s looks from the fall/winter 2022 show.PHOTO: FILIPPO FIOR
Inside, the space is expansive and plush, with cinematic architectural details like sweeping arches and an extra-wide staircase made out of Portuguese limestone that joins the four floors. The ground floor is for makeup and perfume, accessories, costume jewelry, silk and men’s leather items—entry-level categories for many, and popular ones. You work your way up to get fancier and more specialized, with men’s made-to-measure, homewares, women’s ready-to-wear, shoes, equestrian gear, high jewelry and watches, and you finish with leather at the top—still the jewel in Hermès’s crown, responsible for almost half of its annual sales.
As he has for more prominent stores in the past, Pierre-Alexis Dumas has selected artwork and objects from the company’s in-house museum in Paris. There will be talks and presentations, and a small speakeasy that serves champagne, coffee and a signature cocktail. (The cocktail was still in development at press time, but it is unlikely to be orange. Too gimmicky.) There are VIP rooms and spacious dressing rooms. For the first time, the store team includes a concierge post. This has been filled by Casey Legler, who previously worked in the front of house at Le Coucou in Manhattan and Blue Hill at Stone Barns upstate.
There are plans to add another New York store in 2026, in Brooklyn’s Williamsburg neighborhood (a pop-up will open there next year). But if Hermès could survive the transition to the automobile, from which came the brand’s turn to luggage and silks, there is reason to believe it can even find its footing via the L train.
Hermès CEO Axel Dumas.
Dumas was 42 when he was named CEO of the publicly traded but family-controlled company, and he has overseen its most explosive period of growth. In 2013, revenue was $5.2 billion; in 2021, it had nearly doubled to $10.2 billion. Shares, which now trade at around $1,400, have quintupled in value. Outside of the eight years he spent working for
BNP Paribas in China and New York, his entire professional career has been at Hermès, where he started as a financial auditor in 2003. His posts since those early days included director of fine jewelry and head of leather and saddlery, which was Dumas’s job when Hermès started to wage its biggest battle, against a suspected hostile takeover by
LVMH. The Guerrand, Puech and Dumas families, offspring of Émile Hermès, a grandson of the founder, combined to establish a holding company that controls 54.3 percent of the company, which no family member can sell to outside buyers for decades. (LVMH agreed to distribute its stake in Hermès to its shareholders, and it paid a $10.6 million fine for skirting reporting rules in its acquisition of shares, though the conglomerate maintained that it had not broken any regulations.) Soon after this initiative began, Dumas was promoted to COO, reporting to then-CEO Patrick Thomas. While Thomas was the first person outside the family to hold the CEO position after the death of Jean-Louis Dumas, there is no predetermined order of succession for family members. I ask Dumas, who comes across as a bit bashful despite a taste for natty suits, if the executive committee knew he was a corporate killer. “Kindness is not a synonym for weakness,” he says. “Just this year, we renewed the shareholder arrangement for 10 extra years, so we have 20 years ahead of us. The only way to renew it was with unanimity. So 100 people have again relinquished their rights to sell shares, which is touching. It’s about commitment and knowing what you want to achieve.”
Women’s styles from the fall/winter 2022 show.PHOTO: FILIPPO FIOR
Dumas insists that Hermès is a collective; his rhetoric around the company mirrors that of his cousin Pierre-Alexis, who refers to himself as a steward despite making his own significant contributions to the house. Pierre-Alexis has held the top creative post at the company since 2005 and has a seat on the board of directors, almost unheard of in the fashion world. He created the Fondation d’Entreprise Hermès, which partners with contemporary artists worldwide, researches sustainability and promotes education. (In 2021 a pilot program on permaculture was rolled out to six middle schools.) Craftsmanship is revered at Hermès, and while there is an in-house tradition of artistic independence, there is also a willingness to stick with what works. The quest for novelty that results in a revolving door of designers at so many legacy fashion companies doesn’t trouble the executives. Véronique Nichanian has designed menswear for over 30 years. Pierre Hardy, whom Jean-Louis Dumas hired in 1990 to design shoes, began designing costume jewelry as well in 2001 and fine and high jewelry in 2010. Nadège Vanhee-Cybulski has designed womenswear since 2014. The lead creatives collaborate too, as with the launch of makeup, which saw Hardy designing packaging, Bali Barret, the former artistic director of women’s products, selecting colors, and Christine Nagel, the head of perfume creation, crafting the scents. (Today the creative director of makeup and skin care is Gregoris Pyrpylis, formerly of
Shiseido, who continues to work with Hardy and Nagel.)
“We have more than 100 designers in the company,” says Axel Dumas, “and we do final product reviews together. I don’t get a vote on color—the risk would be that I did.” He simply asks to be amazed. “Overall, am I amazed, or can we do better? Is it risky enough?”
Hermès launched a beauty category in spring 2020. Lipstick, $72. Hermes.com. A Kelly II Sellier en Désordre handbag, $16,100, and a woman’s clog, dubbed the Calya Mule, $1,125. Hermes.com.PHOTO: STUDIO DES FLEURS
Risky doesn’t mean trendy, which is studiously avoided at Hermès. Not doing things the way other luxury houses do can mean leaving money on the table in the short term, and this might be the most unexpected thing about the company, which IPO’d in 1993. Take perfumery, which at competitors is often a license owned by a third party. Scents are cranked out at a dizzying pace, usually without input from the person designing the clothes, who is ostensibly responsible for the brand image. Hermès was rare among its peers to appoint an in-house nose, Jean-Claude Ellena, in 2004, even rarer never to have given him an assignment, but to let him create according to his own vision. (The same arrangement extends to Nagel today.) The company also owns and oversees its own production. And while perfume is a cash cow at other companies, the perfume and beauty category accounts for a mere 4 percent of Hermès’s overall business.
Leather is still king, and given the enduring passion for Birkins and Kellys, Hermès works at capacity. Waiting lists for the products are not a function of artificial scarcity, but actual scarcity, given that each bag is made start to finish by the same artisan, and skins of the appropriate quality are in short supply. Between now and 2026, Hermès will have opened five new leather production facilities in France, for a total of 24. Last year it established the École Hermès des Savoir-Faire, which grants a nationally recognized diploma as well. Hermès endeavors to produce its own skins as much as it can to ensure quality and unfettered access. It began building a fourth saltwater crocodile farm in Australia in 2020, though its production of the hides globally will not increase. (It is working on employing new materials as well, including a vegan leather made out of mushrooms, developed by the California-based startup MycoWorks, which debuted last year in the form of a travel bag.)
Artisanal tools used at Hermès.
There is no marketing department to oversee product rollouts such as the ongoing collaboration with Apple watches. And so, instead of a simple presentation, how about a scavenger hunt in Venice? Or a poet customizing lines in celebration of lipstick in real time? How else to explain the delirious quirkiness of HermèsFit, an ephemeral exercise studio that toured New York, Tokyo and Paris, incorporating hats, scarves and shoes into bona fide weight lifting and yoga sessions, complete with a
coach?
“You always need to have an idea that’s a little bit crazy,” Dumas says. “It’s people, it’s not a strategy. You need to have slightly crazy people in your company and give them the freedom to express an idea. Otherwise you can be boring or too transactional. When the end goal and the means are too aligned, you lose the spirit andthe soul.”
Hermès maintains its distinctive culture in part because it has an unusually low rate of staff turnover. (The same extends to key suppliers; the 2022 shareholders letter notes the average relationship with the house is 20 years.) Most workers become shareholders, and they all got a €3,000 cost-of-living bonus last year, too. Likely this contributes to the Universum Global rankings, which named the company the second most attractive employer for French students in 2022, after LVMH, and in the top five for executives.
Hermès employs artisans specialized in each of 16 different métiers, or product categories.
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And yet the future is unpredictable. Even without a world in upheaval, there is the virtual universe, occupying a greater place of importance for young consumers. Where does a company of artisans find itself in a dematerialized future? Hermès was early to start e-commerce, which, in the early 2000s, felt as alien as the blockchain does today. “Blockchain technology allows you to track your supply chain and add data in a faithful way, which is interesting,” Dumas says. “NFTs as a product for sale in their own right is a trickier question. We are craftsmen, and we’re not just selling an image. But in 10 years if our clients require NFTs to accompany physical products, so they can have an avatar dressed as they are, we can think about it. I’m not sure we’d ever sell an NFT without a physical product, but in a way it won’t be up to us to decide. It will be the client.”