Hermès, the renowned luxury brand, has experienced remarkable success in 2021 despite the obstacles presented by the Covid-19 pandemic. The company achieved a significant revenue growth of 41.8%, reaching €8.9 billion. It also reported an exceptional operating margin of 39.3% and a net profit of €2.4 billion, marking a 76.5% increase compared to the previous year. These impressive results make 2021 the best year in the company’s 185-year history. However, Hermès did face a decline in its share price on the Paris stock exchange in the fourth quarter, primarily due to a slowdown in its core business of leather goods.

The success of Hermès can be attributed to its organic growth strategy, which places a strong emphasis on the high quality of its products and its integrated production methods. However, this strategy has also presented challenges for the brand as it struggled to meet the increasing demand for its products. In the fourth quarter of 2021, sales only rose by 11% compared to the previous year, and the leather goods and saddlery division, which accounts for nearly half of the company’s revenues, experienced a decline of 5.4%. Despite these setbacks, the division has still grown by 11.2% compared to 2019.

During a conference with analysts, Axel Dumas, Hermès’s executive chairman, acknowledged that the Covid-19 pandemic had caused constraints and slowdowns in production. However, he highlighted that the company’s production dynamism still enabled them to achieve a growth of over 23% in two years. Sales of leather goods have also increased by 29% year-on-year.

While the leather goods division has traditionally absorbed the impact of crises in the past, Dumas noted that all of Hermès’s product categories have experienced extraordinary demand during the current crisis. The watches division has seen growth of 73% over two years, while the ready-to-wear and accessories division has grown by 59%. Silk and textiles, perfume and beauty, and other categories such as jewelry and home goods have also experienced significant growth.

To meet the increasing demand, Hermès has made substantial investments in expanding its production facilities. The company plans to open a new leather goods factory every 12 to 18 months. In 2021, two new workshops were opened in France, with plans for more in the future. This expansion has allowed Hermès to create around 1,000 new positions each year, with over 1,000 employees joining in 2021. The current workforce stands at 17,595 people, and Hermès is committed to maintaining employee satisfaction and engagement.

One factor that contributed to the slower growth in the fourth quarter was Hermès’s decision to have lower price increases compared to its competitors. Dumas emphasized that the brand’s pricing strategy is based on manufacturing cost increases rather than using prices to drive sales. This approach ensures authenticity and customer trust, which are essential to the brand’s appeal. Typically, Hermès increases its prices by about 3% each year to account for annual cost inflation.

Despite the challenges faced in the fourth quarter, Hermès remains optimistic for 2022. The company forecasts a volume growth of 6-7% for its leather goods division, with additional price increases. With its commitment to high-quality craftsmanship, organic growth, and customer satisfaction, Hermès continues to establish itself as a strong player in the luxury industry.

Useful links:
1. Hermès Official Website
2. Statistics on the Luxury Goods Market Worldwide