Hermès investor relations material

The ultimate status symbol

Luxury at its finest

You simply can not talk about fashion without mentioning Hermés, the brand that year after year has been recognized by elites, nobles, and royalties and is known as the ultimate status symbol.

In a high-inflation environment, customers tend to be more careful with spending, cutting off occasional purchases and instead buying what's most important. Companies also face headwinds, with higher costs eating up their profits. You may think this is a big problem for luxury giants such as Hermés. However, Hermés does not target these types of non-resilient customers; they target affluent customers that are more insulated from economic downturns - customers they can pass on rising costs to.

Fully focused on the Hermès brand

This French luxury behemoth has often been ranked as the world’s most valuable standalone luxury brand and enjoys an iconic status in the fashion industry. Unlike main competitors like LVMH, Richemont, and Kering, Hermès does not operate a conglomerate-like business. Instead, the company is fully focused on its Hermés brand. The company operates mainly through three segments accounting for 80% of their revenue:

• Leather Goods and Saddlery, ~45%

• Ready-to-wear and Accessories, ~25%

• Silk and Textiles, ~10%

Ever since its inception in 1837, when Thierry Hermés opened his first workshop, the focus has been on creation, craftsmanship, and an exclusive distribution network, which has led to the creation of ultra-luxurious and elegant objects that truly stand the test of time. An example of this is the signature Birkin bag that takes more than 25 hours to make and is the most expensive bag in fashion history - often costing over six figures (EUR). For generation after generation, the torch of luxury, responsibility, and tradition has been passed on in the Hermés family, and the company is currently run by Axel Dumas - the sixth-generation leader.

Hermés currently employs over 18,400 people, mainly in their 52 production sites in France, and has over 300 stores spread over 45 countries. The company has enjoyed an average ROIC of almost 43 percent over the past decade. And has increased its revenue by roughly 3x and EBIT by 3.7x during the same period.