Hermes may be known for its Kelly and Birkin bags, but the luxury brand is making waves on the stock market as well. The French luxury fashion house has overtaken Societe Generale, France’s second largest bank. Hermes’ current value is 30 times higher than that of Societe Generale. The new valuation is good news for luxury brands as a whole, but more so for Hermes. Thanks to the company’s new market capitalization, Hermes is currently valued at €3.3 million per employee. Following the fashion house’s smashing performance on the Paris stock exchange, it is currently valued at €28 billion. Societe Generale trails behind at €18 billion.
The fashion house will be welcoming the new developments. Recent turbulence in the stock market had once again put the luxury industry on tenterhooks. The Hermes valuation could ease worries of a second recession in the luxury industry. It would certainly encourage luxury brands to look back upon the past six months where the Chinese and other emerging markets have fuelled high sales. Hermes too has benefitted from the spending habits of newly affluent Chinese buyers. Over the first six months of 2011, Hermes recorded sales of €1.3 billion – that is an increase of 22 percent. The rise in sales was due not only to the high spends of Chinese buyers, but also because American buyers are once again returning to their luxury shopping ways.
In fact, the high sales have brought on a new problem for Hermes – a possible shortfall of bags in the coming months. In order to battle the shortfall, Hermes has already hired 400 new staff members. The immediate objective is to increase production by about 10 percent.
The demand for Hermes’ luxury bags is largely due to the company’s reputation for fine artisanship. It still takes 18-24 hours for 340 people to sew each Hermes bag by hand. Hermes chief executive Patrick Thomas said in a recent interview, “We try to do poetry and we get excellent economic results.” The excellent economic results may be the direct result of the high prices attached to each Hermes product. The iconic Birkin bag, named after singer Jane Birkin, costs a minimum of £5,400. Higher priced versions, like Birkins made with saltwater crocodile skins cost up to £100,000. In fact, the firm is known to delay orders because it cannot find the right type crocodile for the luxury bag.
Currently, however, Hermes is suspiciously eyeing another type of crocodile. Luxury conglomerate LVMH’s acquiring a 21 percent stake in Hermes has not gone down well with the family-owned firm. Although Bernard Arnault insists that LVMH is not planning an eventual acquisition, Hermes’ owners are not so sure. They are keen to continue with their artisanal style of business – a method that could suffer if Hermes ever were to come under the umbrella of the business-minded LVMH.
Hermes is dedicated to delivering unique and authentic experiences. When Birkin informed Hermes that the Kelly bag (named after Grace Kelly) was not large enough, Hermes enlarged the bag and made it brighter. Hermes’ commitment to promoting exclusive hand-sewn bags has made it the ultimate name in the luxury sector. And having overtaken France’s second largest bank, Hermes looks set to conquer the rest of the world.