Hermès Explains High Price Increases Despite Soaring Growth in 2023

Another outstanding year for Hermès, beating investor expectations and thriving despite the luxury slowdown others brands experienced. And it’s not just the hallmark and coveted Birkin and Kelly handbags contributing to the success. As Hermès customers well know, there aren’t enough of those to meet demand.

In 2023 the heritage Maison announced record high revenue of $14.4 billion (€13.4 billion) with consolidated revenue up 21% at constant exchange rates (16% at current exchange rates) over 2022. All geographic regions and business lines experienced double digit growth. Q4 produced a 18% increase in sales (13% at constant exchange rates).

Image courtesy: @alice.orso

Speaking from its Sèvres boutique in Paris, Hermès CEO Axel Dumas, reflected upon the exceptional year in an unstable global context:


“In a market that is more and more polarized, this performance reflects the solidity of our corporate model that craftsmanship resting upon vertical integration and a strong local territorial base testifies to the strong desirability of all the divisions.”

Image courtesy: @kristina_alaren

As Dumas said during the Q&A portion of the presentation: “We don’t do +20% in a difficult economy” and that other years have been much more difficult. 

With these results, Hermès has granted all 22,000 employees a €4,000 bonus. At the General meeting, the  company will propose a €15.00 per share dividend plus an exceptional dividend of €10.00 per share, something that Dumas says occurs every three to four years.

Before we discuss the 2023 business line and geographic region breakdowns, let’s address the surprising (to some anyway) 8-9% Hermès price hikes imposed in the early days of 2024. Seemingly higher than its competitors, Dumas was asked what convinced him that he could go to that level. After confirming that 8-9% was the range of increases across the board and all divisions, he explained that they were to cover production cost increases of 6% and the negative currency impact. He emphasized that Hermès mainly uses production costs to decide prices, stating that Hermès’ margin rates are the same for all items, whether it is very desirable or less desirable. Additionally, Dumas noted the 3-4% annual hike taken three years ago when competitors jacked prices much higher. He said, at the time, he was criticized for not going higher, and Hermès’ stock price took a hit.

Hermès Staffing

Another interesting tidbit was about store stock and staffing. Seemingly acknowledging that stores are crowded and to serve these clients better, Hermès needs to improve with better trained and more salespeople. And that requires bigger stores. 

With respect to stock recovery, he noted that if you come to the boutique and don’t know what you want, they’ll find you something. But if you come for something specific, that is more difficult. Dumas also reiterated that individual stores select their own inventory.

When it comes to Hermès business lines, revenue for the biggest group, Leather Goods & Saddlery, grew 17% (at constant exchange rates) over 2023. Hermès highlighted many of its new styles, like the Arçon, Della Cavalleria Elan, and HAC Multipocket.


Hermès Handbag Production

One comment in the financial presentation stuck out though. Regarding the 17% revenue growth, Dumas expressed that the 17% could be greater if more bags were available, but that this number was “in line with objectives.” Does that mean Hermès doesn’t want more bags available? Or that it cannot produce enough bags? It’s not clear. Hermès pointed to the addition of new leather production facilities, saying capacity increases 6-7% per year, that one bag takes 15 hours, and that not everyone can produce every bag. That is especially true for the very high end special and novelty bags, which have been very popular.

Revenues for Hermès second largest group – the Ready-to-Wear and Accessories line, that includes footwear – rose 28% (at constant exchange rates) over 2022, representing the greatest increase. The “Other Hermès Sectors”, home to homewares, rose 26% no doubt evidencing the continued trend of Chez Hermès decor. The Watch group increased 23%, while Perfume and Beauty grew 12%. And per Dumas, expect to see a skin care line from Hermès.

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Image courtesy: Vogue France

Unmeasured, and likely unmeasurable, is whether and to what extent divisions other than Leather Goods & Saddlery succeed as Birkin and Kelly dreamers fill their wardrobes and homes with so-called Birkin bait. Are you dressing in Hermès because it’s your style (and the brand has elevated its designs in recent years)? Or setting a dining table with Mozaique au 24 dinnerware as an elegant presentation? Only you know for sure. 

Geographically, at constant exchange rates, revenue grew at a fairly even 20% rate over 2022. The largest region by more than two-fold, remains Asia as a whole. Revenues in Japan increased 26% – less that one quarter of the region as a whole – while Asia not including Japan (which includes China) rose 20%. Europe, as well as France and Europe excluding France showed 20% revenue increases. And the Americas revenues grew 21%, with new stores in Naples, Aspen, and Topanga (LA area). 

So, what does this mean to Hermès clients? Well, don’t expect more or easier availability of bags; even a 7% increase in production doesn’t seem likely to cover the ever-increasing demand. Whether and to what extent prices increase in 2025 will depend on the cost of goods and labor, and currency valuations – so who knows just how much they’ll go up next year.

Published: February 9th, 2024
Updated: February 9th, 2024

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