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Wednesday, November 9, 2022

Luxury brand Hermès plans new factories as handbag demand soars | Hermès

Hermès, the French luxury goods maker, is opening three new factories as it struggles to keep up with demand for its £5,000-plus Birkin and Kelly handbags.

The company said on Friday it planned to open new leather goods factories in the French towns of Louviers, Sormonne and Riom before 2024 in order to increase and speed up its production of the expensive bags.

It has also recently opened its first leather-working school to train more craftspeople in the art of handbag making.

The company, which already has more than 4,300 leather workers on its staff, said it was hiring more than 400 artisans each year. However, Hermès said it needed far more to keep up with demand for its handbags, which has jumped during the Covid pandemic as soaring stock markets have left the world’s richest people with a lot more disposable income.

The bags have become must-have collectibles for the super-rich and celebrities, including Victoria Beckham, Katie Holmes, Rita Ora and Kelly Brook, with some women owning hundreds of the most sought-after designs.

Rare Hermès bags have also proven extremely popular at auction, with some selling for almost £300,000.

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“We are facing high demand, and we have a product that is very handcrafted,” the executive chairman of Hermès, Axel Dumas, said. “It takes 15 hours [to create] an Hermès bag. Even if there’s a lot of demand, I’m not going to start doing them in 13 hours to raise production.”

Dumas said there was often a long waiting list for the bags. “Contrary to what people may think, we’re always very sad when we have to say no to our customers, because we don’t have that.” He ruled out raising prices.

The lack of handbag stock led to a 5.4% drop in fourth-quarter sales at its leather goods and saddlery division, which accounts for almost half of total sales. The news sent Hermès shares down 7% on Friday, before recovering slightly to a 5% decline, which was still its biggest one-day fall since 2016.

Overall sales rose to €2.38bn in the three months to December, with American and Chinese shoppers driving strong growth, but were below analyst forecasts of €2.53bn.

The slow growth at Hermès contrasts with an acceleration at other luxury groups such as LVMH Moët Hennessy Louis Vuitton, the world’s largest luxury label, and the Gucci owner, Kering, which have posted much better-than-expected results.

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