Keeping in the Family

News that Hermès produced some of the best Q1 sales results of luxury sector was overshadowed by the death of its former president and chief executive office the former president and chief executive office Jean-Louis Dumas. As the industry mourns the loss of the man that made Hermès a global brand, turning over €1.9 billion in 2009 with wide-ranging interests, the stock market has been speculating on the future of the company.

Hermès position is certainly strong; sales in the Asia-Pacific regions (excluding Japan) jumped 45% in the first quarter. But, to the envy of many competitors, its growth also came from established markets. Sales were up 15% in Europe and 20% in the Americas, where the company opened its first men’s-only store in New York in February.

Such is the perverse nature of business, news of Dumas’ death pushed Hermès stock skyward, as speculation gathered – once again – that the company is a takeover target. This is despite repeated denials from the family. Antoine Belge, an analyst at HSBC in Paris who specialises in the luxury sector echoed this, arguing that the family is still committed to keeping the company independent. It’s certainly not done them any harm. As a family-owned business Hermès has the luxury of taking risks when it wants to – such as buying Shang Xia or its share of Leica – and staying steadfast elsewhere, as shown by its refusal to bow down to pressure for more accessible price points. Although led by outsider Patrick Thomas, this unique approach is enabled by its family-owned status and a fundamental part of the company’s DNA.

But as it remains in an ever-decreasing minority of sizeable family-owned luxury businesses, it’s difficult not to wonder just how long it will take before the stock market’s wishful thinking turns into a bona fide takeover. And if and when this does happen, let’s hope that Hermès is allowed to continue to be one of luxury’s quiet renegades.

Sources
Business Week – 7 May 10
Reuters – 6 May 10
The Independent – 2 May 10