Don’t Cry for Hermès – Record Profitability in 2017

@alexstrickland

Luxury iconic brand Hermès announced its financial results for 2017 showing “record profitability”. Demand for the elusive five figure Birkins and Kellys has not waned and the company’s popularity is thriving in all categories. Hermès shareholders can expect a dividend (but certainly not in the form of any leather goods).

Despite some inventory difficulties at the end of the year, overall revenues for 2017 are up 9 percent. Annual net profit rose 11 percent. All geographic areas posted increases with Asia (excluding Japan) leading the pack with 11 percent growth.

Hermès declared 10 percent sales growth in leather goods and saddlery in line with the company’s target in production capacity to “meet the strong demand for both iconic bags [i.e. Birkin and Kelly] and the other models such as the Constance, Halzan, Lindy and Verrou bags.”  Other areas with double digit gains were Perfumes and the Other Business Lines encompassing Jewelry, Art of Living and Hermès Table Arts.

The Hermès workforce increased by 650 people, more than 400 of which are in France, mainly in production and sales. As you may recall, Hermès has been increasing its leather production facilities to keep pace or catch up to demand.  Despite its global reputation, Hermès remains very much a French company with nearly 62 percent of the company’s estimated 13,500 employees in France.

As for 2018, Hermès is looking to continue ambitious revenue growth. Whether this includes a further increase in Birkin/Kelly/Constance availability remains to be seen. In the past, scarcity fueling demand has seemed a part of the brand’s strategy, to the frustration of many consumers and to the satisfaction of others. The obvious increase in Birkin and Kelly supplies in 2017 surely brought greater revenues to the company, along with some very happy buyers, but frustrated many long-time customers who fear an end to exclusivity (read: More Birkins, More Revenue (For Now?)

For 2018, an online presence in China is in the works, presumably to resemble the recently rolled out improved website in the United States and to take advantage of the great demand in that market.  

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