Hermes International SCA (RMS), the French maker of Birkin bags and silk scarves, expects sales growth in the Americas next year to at least match 2011’s pace as shoppers in its second-fastest expanding market focus on quality.
“There is plenty to come,” Chief Executive Officer Patrick Thomas said in an interview at his Paris office. “We’re not expecting any decline in growth” in the region in 2012.
Hermes, whose revenue gains have been hampered by capacity constraints, plans to build two leather factories in France in 2012 to cope with surging demand, Thomas said last month. The bagmaker, which is forecasting sales will rise as much as 16 percent in 2011, will remain one of the fastest-growing luxury- goods companies even in a challenging economy thanks to its distinctive positioning, HSBC analyst Antoine Belge has said.
Sales, excluding currency effects, climbed 30 percent in the Americas in the first nine months of 2011, lagging behind only the Asia-Pacific region, excluding Japan, where revenue on that basis jumped 32 percent.
In periods of economic uncertainty, “people decide to go for quality rather than luxury,” Thomas said in the Dec. 12 interview. The CEO said he isn’t too concerned about the fallout from Europe’s debt crisis as Hermes has more orders for bags and other items than it can fulfill. The company will slow retail expansion next year because “there’s no point opening stores if you can’t meet demand.”
Slowing Sales Gains
Revenue growth at Hermes will slow to 10 percent in 2012 as long as the world economy doesn’t enter a serious recession, Thomas told Le Temps in an interview this month, calling the estimate cautious.
Hermes’s family owners have formed a new holding company aimed at ensuring they continue to control the maker of 5,500- euro ($7,200) Birkin bags after LVMH Moet Hennessy Louis Vuitton SA (MC) built up a 21.4 percent stake. LVMH’s holding has propelled a 47 percent jump in Hermes stock this year amid speculation of a takeover. “The fight is over now” following the holding company’s formation, Thomas said.
The CEO said he will retire by 2014 and Hermes’s next chief will be one of the current members of the executive committee. “It’s going to be a smooth succession,” he said.
To contact the editor responsible for this story: Sara Marley at firstname.lastname@example.org