After the price increase, Hermes wants to take Chanel’s job

Wen| Source Sight Zhou Yi

Following a round of price increases at the end of 2024, Hermes does not intend to stop.

The latest financial report shows that Hermès revenue in 2024 will be 15.2 billion euros, and net profit will reach 4.603 billion euros, an increase of 15% and 7% respectively. In terms of categories, the leather goods and saddlery division, led by bags, still performed well, with performance reaching 6.457 billion euros, an increase of 18%, accounting for 43% of revenue; the performance of the ready-to-wear and accessories division was 4.405 billion euros, an increase of 15%. In addition to these two core business units, the performance of perfumes and beauty also increased by 9%, and only the performance of watches fell by 4%.

Screenshot comes from company announcement

It seems that the bucking performance has given Hermès more confidence. Axel Dumas, chairman and CEO of the group’s executive board, said that this year Hermès will increase its price by 6%-7% globally.

In addition to exceeding expectations, Hermès revealed a lot of information at subsequent analyst meetings, of which the industry paid most attention was its once again mention of plans to enter the Gaoding fashion collection. Obviously, after abandoning the fragile middle class, Hermès has targeted the top 1% and is getting better and better. At the beginning of 2025, it just issued an annual bonus of 4500 euros to more than 25000 group employees around the world.

“Low-sensitive customer base

The environment is not beautiful. According to the “Global Luxury Market Research” report jointly released by Bain Consulting and the Italian Luxury Goods Industry Association, the luxury consumer group has shrunk by about 50 million in the past two years. The reasons include the cooling of the macroeconomic environment and luxury brands have successively increased prices.

Hermès unit price is high and prices are steadily increasing, but the shrinking number of its customers does not seem to have affected the development of the brand. Compared with the doldrums of other luxury brands, Hermès’s double-digit growth explains a lot of problems.

The first is the price increase strategy. Andrea Guerra, CEO of luxury brand Prada, and Bernard Arnault, Chairman and CEO of LVMH, have successively mentioned the drawbacks of price increases, reflected on the matching of price increases with product value, and proposed that a price increase without quality is suicide.

Hermès has not expressed similar sentiments about price increases. CEO Axel Dumas said at an analyst conference that Hermès past growth did not rely on store expansion or price increases, but on increased sales.

In 2024, Hermès will achieve growth in all geographical regions around the world. Two regions deserve special attention. One is Japan, where sales increased by 23%, the highest growth among all regions. The other region is the Asia-Pacific region represented by China., an increase of 7%. Although the growth rate is the lowest, it accounts for 47%, which is the region with the highest proportion.

Screenshot comes from company announcement

In 2024, the yen will weaken and the exchange rate against the US dollar will continue to weaken and depreciate severely, triggering a shopping craze in Japan, especially the sales of high-end beauty cosmetics and luxury goods. However, Hermès does not rely on the logic of travel retail. Axel Dumas mentioned a word when analyzing regional performance, we basically sell to Japanese people in Japan and to China people in China. rdquo;

Combining the price increase with the loyalty of local customers, consumers do not specifically choose to shop in areas with lower unit prices. This shows to a certain extent that Hermès customers are not highly sensitive to price, and the price increase will even help close the deal.

According to Axel Dumas ‘statement, Hermès will continue to raise prices globally in 2025, further widening the price gap with other luxury brands.

Expand cautiously

Hermes is extremely cautious about expanding. Axel Dumas, who has been in charge of Hermès for 12 years, mentioned that in 2013, Hermès had 313 stores, and so far Hermès has 293 stores. Although the number has decreased, revenue has increased fourfold.

At present, Hermès still follows the strategy of opening a new store in a new city every year in China, enhancing scarcity while retaining brand value, and its expansion has its own pace.

Compared with LVMH, which has 70 brands, Hermès lacks enthusiasm for brand acquisitions. At this year’s earnings conference, Axel Dumas reiterated that the core strategy of vertical integration and the production capabilities of each product line are put first.

Therefore, in 2025, Hermès’s investment will still focus on building leather products factories. In September 2024, it just opened its 23rd leather products workshop. The financial report mentioned that it will open three new workshops in the next three years. High-quality leather products and professional craftsmanship are the most personalized advantages that Hermès is unlikely to give up. It has established 10 craft schools in France.

It can be seen from the 2024 financial report that Hermès current free cash flow is 3.767 billion euros, and LVMH’s free cash flow during the same period is 10.5 billion euros. Whether in terms of group size or number of brands, Hermès’s financial situation can fully support More investment activities, at present, watches that perform poorly in 2024 will receive more investment attention in the future.

During the entire earnings conference, the biggest surprise Hermès threw out about the expansion news was that it would officially enter the field of haute couture and meet Dior and Chanel again.

If Hermès has absolute say and status in the field of bags, the embarrassing point is that Hermès clothing is often regarded as a kind of distribution. Whether it is a fashion design concept or a famous brand creative director, Hermès’s low-key has lasted for a long time.

However, in 2024, Hermès’s ready-to-wear accessories division achieved strong development momentum, growing by 15%, which the brand believes is due to the success of the ready-to-wear and footwear series.

Axel Dumas mentioned that Hermès has shocking leather products, so the high-definition fashion field, which also depends on the level of craftsmanship, is also of interest to Hermès.

Different circles must be integrated hard”

The French Federation of Haute Couture and Fashion (FCHM) is responsible for Haute Couture, which has very strict requirements for the Gauding brand. For example, it requires a limited number of pieces for Gauding styles, pure hand-made, owning workshops in Paris and employing a certain number of workers, and must provide 100 sets of original Gauding garments a year. Currently, there are 9 official members.

The rigid geographical and operational requirements are not a problem for Hermès, which started in France. However, compared with Chanel, Armani and Dior, which have long been official members of Gauding, Hermès will only make its debut at Gauding Fashion Week in Paris in 2025.

To a certain extent, Hermès is an unranked newcomer in this circle, and high-ranking customers prefer brands with a history of fashion houses, such as Chanel.

Two soul designers Coco Chanel and Karl Lagerfeld have created a classic chanel style, making Chanel one of the most profitable fashion brands in the world. Chanel’s former creative director, Virginie Via, is also Carl’s long-term assistant, continuing Chanel’s elemental style.

The screenshot comes from the company’s official website

For Gaoding Fashion, the position of creative design director is crucial. In the past two years, this position in major luxury brands has changed frequently. In December 2024, Chanel appointed Matthieu Blazy from BV as creative director. Givenchy, Dolce Gabbana also changed creative director this year. Only two months have passed since 2025, and the creative directors and men’s wear artistic directors of Gucci and Dior have also changed.

In comparison, Hermès’s fashion creative director does not have a particularly long history and is rarely discussed in the industry. The last designer considered to have a unique style was Gotiye, who served from 2003 to 2010.

Hermès’s current creative director of women’s wear has previously worked in Maison Martin Margiela, C line and other places, but has not had a more eye-catching design experience. The industry is generally believed to have a minimalist style preference. The creative director of men’s wear has served in Hermes for more than 30 years, and it is hard to imagine that he has more room for growth.

For many years, Hermès has not so much been low-key in the fashion field as has made no achievements. When other luxury brands continue to set off trends in the fashion industry, Hermès has missed too much time.

Hermès may not want to admit it, but its reliance on leather goods lines has given it a special comfort zone. Hermès has always wanted to balance all aspects, balancing regions and product divisions. In the words of Axel Dumas, we will not destroy the leather goods department to make other departments look better.

When growth continues as usual, Hermes wants more. On the fiercely competitive high-end line, competing luxury brands may reshape the balance that Hermes hopes for.