The Ledger
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Bernard Arnault secretly accumulated Hermès shares using equity swaps over ten years.
“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…”
Over 50 Hermès family members locked 50.2% equity to block LVMH.
“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…”
Hermès caps workshops at 300 artisans and mandates single-artisan assembly.
“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.”
Bernard Arnault swapped his Hermès shares to secure 100% control of Dior.
“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 …”
Hermès enforces a strict internal corporate policy against hiring management consultants.
“Hermes has a corporate policy of no consultants, and now I know where that came from.”
Hermès only expands retail locations where local clientele can sustain them.
“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.”
Birkin and Kelly bags alone generate 25% to 30% of Hermès revenue.
“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.”
LVMH's employee turnover in 2022 was 24%, compared to 6% for Hermès.
“Well, LVMH's total turnover in twenty-twenty-two was 24%, versus Hermes's six percent.”
Hermès increased its share of company-owned retail locations from 56% to 74%.
“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%.”
Hermès Horizons actively refuses clients who request prominent logos on bespoke commissions.
“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…”
62% of Hermès' 21,000 employees are based in France.
“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…”
Hermès' 15% annual revenue growth is driven equally by volume and price.
“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…”
The Hermès Birkin bag took five years to achieve commercial success.
“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…”
Hermès sales shifted from 55% silk in 1988 to 43% leather.
“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.”
Hermès floated 19% on the Paris Stock Exchange, keeping 81%.
“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%.”
76% of Hermès production is in France, while 85% is sold abroad.
“Today, 76% of their production is in France, and 85% is sold outside of France.”
Asia, excluding Japan, accounts for 48% of total Hermès revenue.
“Well, today, rest of Asia is 48%. Half of Hermes' business is Asia excluding Japan.”
Hermès operates 15 global repair workshops that mend 120,000 items annually.
“They have 15, this is flashing for today, 15 dedicated repair shops worldwide, and they mend 120,000 pieces a year.”
Hermès has raised prices approximately 7% annually across its product line.
“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.”
Hermès reached a $200B valuation despite rejecting standard manufacturing efficiencies.
“A company that somehow has grown to be worth over two hundred billion dollars, despite rejecting manufacturing efficiencies and economies of scale.”
Hermès divides net income roughly equally into dividends, CapEx, and cash.
“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.”
Hermès’s CEO and artistic director apprenticed for five years as teenagers.
“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 …”