hermès recently released their financial results for the first 6 months of 2009. i'll try and keep the analysis light and easy to read, as it is afterall for the blog. headline number reads that overall sales were 7.6% higher as compared to same period in 2008. sounds impressive, especially if you consider the first 6 months to be one of the most difficult periods for retailers. let's break it down by components and see what's driving the increase.
"distribution via the hermès exclusive network" refers to business lines which they have direct control of, mostly from sales in their own stores (non concessions). as expected, main revenue generator came from leathergoods division, although other core areas which they are also famous for, silk and RTW, recorded positive growth too. stripping away exchange rate movements, leathergoods division is the sole performer with 15.7% increase in sales. a little more on why i think leathergoods did well later.
"distribution via specialist outlets" refers to businesses where they have less control of. these would relate to wholesales of perfume, tableware, watches etc, to departmental stores and specialist shops. the buoyant sales from their leathergoods division was being marred by the significant drop in the wholesale division. in times like this, departmental stores cut down on their shopping budget and try to manage their inventory better. they would be more selective, and bought less for their stores. this was actually in line with other retailers' forecasts. burberry predicted a 25% decrease in wholesales for this period, and recorded a similar level of decrease in their recent financial results release.
"other products" refers to other product lines, mainly john lobb and other activities. unsurprisingly sales fell 40%, rational behaviour suggests that consumers would cut back on spending £700+ on a pair of shoes at times like this (probably the gents as john lobb does more mens shoes. rational behaviour do not apply to ladies and their louboutins!).
excluding exchange rate movements (to compare like for like), overall sales was down 0.4%, still very impressive considering the climate we are in. the decrease was attributable to lower wholesales, when the economy recovers, this would improve too. so they are actually very well positioned at current times.
let's look at which regions were contributing to their sales this year. to compare like for like with 2008, all regions experienced negative growith, except non-japan asia. surprised? in my previous analysis to look at LVMH's first quarter's results, they recorded the same trends: declining sales across most product lines except leathergoods, and all regions faced declining sales except asia. the tiger's appetite sure isn't waning.
so why does leathergoods division do so well contradicting most people's theory that luxury goods industry will suffer during this economic crunch?
in my humble opinion, those that will weather this storm, are those who adopt changes in their strategies and product offerings. i believe the top end of luxury goods will do well, as they are a low volume high margin business. a small drop in number of shoppers should not impact their sales materially.
hermès opened 5 new shops during the year, increasing retail space. perhaps for the first time in many years, we are seeing birkins and kellys readily available for sale in their shops, as opposed to the myth of a long waiting list. being able to control their inventory is a key strength, releasing more bags at passive economic times, and back to the waiting list when demand turns bearish.
the introduction of lower priced bags, like the 40cm "paris bombay", also helped to boost revenues at hermès, while enabling customers to "live the hermès dream".
consumers doesn't just stop spending at times like these, they cut back on frivolous products, things we can live without. hence we see dip in sales for perfumes, tablewares as we can live without them. people cut back on taxi rides, they eat out less and stay home more (domino's pizza delivery recorded 25% increase in sales!), but people need gratification.
a hermès bag is a trophy item, a reward to oneself, a luxury indulgence we carry out once in a while. maybe a rational consumer will cut back from 2 bags a year to 1, but he/she justifies it as a reward and endurance of the times we are in. the consumer will choose wisely, and rational behaviour suggests a more classic item that will last for several seasons, one that is less likely to provoke unnecessary accusations of wealth flaunt. hence the classic hermès bags, with minimal branding, does so well in this climate.
whoever said luxury lost it's lustre? at times like this, the divide between luxury and mediocrity becomes wider. true luxury survives the test of time.
i love doing this post, i hope you enjoy reading too.
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more backstage pics at neil barrett taken by me during milan fashion week, which seems like a l
photographer 
one of my favourite campaigns to date, and i love it that hedi slimane continued the black and white moody shots from the previous season into this fall winter collection. my sensible side is telling me not to go near the studded shirts, but those are achingly beautiful. blending soft and hard to perfection.
reid prebenda from 
might as well start the wishlist now: cardigan from burberry prorsum spring summer 2010.
.: another magazine, issue spring summer 2009 :.
we need to let our hair down and have a bit of fun once in a while.
sunday is for reminiscing balenciaga's archives. if any of these turn up on ebay or 
car crash and a pair of diesel spring summer 2010 trainers. yes very bizarre but that is all part of the diesel showcase in milan. a few more pics to come...
i lust!!!!
i heart heart heart.
when i was in paris last weekend, the newsstands were selling the above magazine. i thought to myself "wow they kissed and made up?", and i realised it was a photoshopped pic. i wanted to get the magazine but there wasn't an english international edition.
