No cutting corners: Hermès CEO puts his foot down
The chief executive of high-end leathergoods brand, Axel Dumas, has defended the policy of making its famous handbags to meet demand, rather than increasing production quickly to build up stock.
On presenting the company’s results for the first six months of this year, Mr Dumas faced questions from financial analysts about a growth-rate of 12% year on year for Hermès’s leathergoods division. The leather business unit brought in more than €2.3 billion of overall revenues for the six-month period of just under €5.5 billion, more than 40% of the total and by far the company’s biggest product category.
But, with higher growth for other categories, including 55% for watches and 36% for ready-to-wear, analysts wanted to know if Mr Dumas was worried about the leather division’s comparatively conservative advance.
“We have read some analysts’ notes commenting on this,” Mr Dumas said, “and they talk almost as though there were a conspiracy and that we don’t produce more [leathergoods] on purpose. It’s not true. When we produce, it is with one idea in mind: quality. If we were unable to achieve the quality we need owing to a lack of the beautiful materials we use, I would simply prefer not to produce. That’s crystal clear.”
He pointed out that Hermès will open five new leather workshops in the coming five years, but said that the increase in production capacity this will bring will, necessarily, be gradual and limited because the company will not compromise on the quality of the materials it uses or on the quality of the craftsmanship of its workers. It will not use lower-quality leather or workers who have not completed their training for the sake of speeding up production, the chief executive insisted.
“I am proud of the results in leather,” Mr Dumas said, “but for quite some time, demand has gone beyond supply. We try to produce to cover demand, but it has to be without any compromise on authenticity. It takes 15 hours of manual labour to make one of our bags. It has to be done by hand. We are not investing in machinery or cutting corners in any way. We are keeping that quality. That’s what helps us stay resilient; it is what gives us our strength. This is part of the magic of Hermès products.”
