Hermès

“Kirkland is a brand the way Tide is a brand. And Hermes is a different kind of a brand.”

“Well, LVMH's total turnover in twenty-twenty-two was 24%, versus Hermes's six percent.”

“The key insight is that by adopting art as a critical piece of the bundle that is your product, it enables you as the seller to completely switch tracks, to disconnect from any evaluation of value.”

“The competitive barriers to the Hermes scarf, I think they're way higher than the bags, honestly, even though the bags are a bigger business now.”

“So in 2011, the family comes together, and over 50 of the 80 family members collectively contribute 50.2% of the equity in the company into a new cooperative vehicle that's called H-fifty-one, as in 51% of Hermes. As in, this vehicle will have majority control…”

“Hermes used to have 56% of retail locations that were company owned. This is back in 2003, so 20 years ago. A little over half were company owned. That's now 74%.”

“The person who was running this division said something like, we get a lot of clients who come in here and they want a big H on whatever it is they want us to make. And we have to have a discussion with those clients that if that's what you want, we are not th…”

“Louis Vuitton has no ability to switch gears and say, ooh, it's important to compete on the vector of handcrafted.”

“They firmly believe that only 250 to 300 craftsmen can work in a building So that's one. Two, it takes two plus years for someone to learn the craft and apprentice. And three, that every one of these things must be created by one individual by hand.”

“Hermes has this incredible unassailable flywheel, but it operates in the exact opposite way of An Amazon flywheel. It's not about maximizing the cycles. It's slowing. It's minimizing. It's a intentionally rate-limited flywheel, and it all works together.”

“If someone else wanted to go compete with Hermes, it'd be hard because they don't have the brand, they don't have the history, but also, you literally can't find any more craftsmen, so you'd have to train them yourselves.”

“So they have 21,000 total employees. 7000 are artisans. 62% of employees work in France, so they really have stayed French. They've not outsourced. They have 54 production sites in France, or what they call workshops, and they manufacture 76% of the objects th…”

“Revenue's grown, 15% compounded annually since Excel took over in 2013. They've increased production seven percent per year. That's their stated goal. So if you say like, okay, of the 15% revenue growth, take out the seven percent production growth, that leave…”

“Hermes is doing the opposite. They want this to happen In order to maintain the image of Hermes, and specifically the Birkins and the Kellys, as a brand and a product that is not accessible to everyone.”

“LVMH, as we talked about on that episode, has world-class, best-in-the-world business executives who partner with world-class, best-in-the-world creatives. At Hermes, these are not different people.”

“Today, the average age of the Hermes artisan workforce is 30 years old, and 80% are women.”

“As much as they sort of get lumped together with brands owned by LVMH, they are in many ways the anti-LVMH.”

“Hermes is the most insulated of all the luxury brands where they have the sort of least cost-sensitive clients.”

“They release the product in 1984, and it is not an immediate success. I think part of this is that the Hermes kind of brand transformation modernization was probably still underway. When you watch interviews with particular Pierre-Alexis, he'll talk about this…”

“Silk Was 55% of the company's sales. Leather was only nine percent. You compare that to today, it is a completely different story. Leather is 43%, and silk and textiles is seven percent.”

“No matter where you live in the world and no matter what your cultural background is, when you attain this status, there's still something about this connection to French and European nobility that you cannot buy from a brand from any other country.”

“So in 1993, Jean-Louis lists Hermès on the Paris Stock Exchange. Collectively, when the dust settles, the family has sold 19% of Hermes to the public. They still own 81%.”

“Today, 76% of their production is in France, and 85% is sold outside of France.”

“So in 2001, right after he lost Gucci, Bernard quietly buys an initial stake in Hermes of 4.9%. Now I believe that was just under the threshold that they would have to disclose it under French securities regulations. And then, here's what they do that the Herm…”

“Well, today, rest of Asia is 48%. Half of Hermes' business is Asia excluding Japan.”

“They have 15, this is flashing for today, 15 dedicated repair shops worldwide, and they mend 120,000 pieces a year.”

“By my very back of the envelope calculations, they are raising their prices on average across the entire line, seven percent per year for the last 10 years.”

“A company that somehow has grown to be worth over two hundred billion dollars, despite rejecting manufacturing efficiencies and economies of scale.”

“Well, I thought one fascinating thing was Excel saying that with the, ah, 4.3 billion in net income that they do, they always split it roughly the same way. One third to the dividend, one third gets reinvested in CapEx, and one third in cash.”

“There's the opposite of scale economies to an individual luxury brand, but at the group level There is power, and specifically scale economies power, that does not exist at the brand level.”

“He takes the Hermes shares and does a share swap. So swaps that value directly With the 25% of Dior that he doesn't own, to bring that first into Group Arnault, his family office, and then he trades that into LVMH. So LVMH now finally, as a result of this, is …”

“Hermes has a corporate policy of no consultants, and now I know where that came from.”

“So Axel Dumas and Pierre-Alexis Dumas, who are the two descendants of Hermes, the sixth generation, that are running the company today. Axel is the CEO and Pierre-Alexis is the artistic director. They apprenticed in the business. When they were teenagers, for …”

“The last 12 months, it did fourteen billion in revenue, 5.7 billion in operating income. They have a 71% gross margin and a 44% operating margin.”

“From, let's call it the real beginning of when LVMH publicly announces Their stake in Hermes. So, twenty-ten. Hermes' market cap is up 16 X.”

“These individual craftsmen are entirely non-competitive with Hermes. It's a completely different value proposition to the customer. When you're buying Hermes today, you don't start from a place of, you know, I think I want some of the very best sewn leather go…”

“Today, management sort of insists that the idea is that each store is for the local clientele, and we will only expand into an area if we feel that we can serve The local clientele that lives there well.”

“In 2020, the Wall Street Journal estimated that about a 120,000 Birkin and Kelly bags were made in that year. That's about 25 to 30% of total revenue coming from just those two bags, which, again, you can't buy.”

“They could sell their products for much, much more than they do, and they do not, because it is the right long-term decision to do so.”

“Ferrari is Hermes and Manchester United smashed together.”