General presentation of Hermes :
The French group Hermes International is a company active in the design, production and sale of all types of luxury goods. Thus, and to better understand the organisation of this company, we can group the products sold by the group into different categories according to the share of turnover they generate.
- Leather goods and saddlery products alone account for more than 49.9% of Hermes' total sales, including bags, luggage, small leather goods, diaries, writing instruments, saddles, saddles, saddlebags, horse riding equipment and clothing.
- Clothing, footwear and fashion accessories account for around 22% of the company's total turnover.
- Silk articles and textile products other than clothing account for almost 9% of the group's turnover.
- Fragrances generate approximately 5.2% of the company's total turnover.
- Watch products such as watches account for around 2.8% of Hermes sales.
- Finally, the remaining 11% of turnover is generated by products in different categories such as jewellery, lifestyle and tableware.
The Hermes group markets these various products through a network of boutiques and shops, with more precisely 310 boutiques around the world, including 219 branches and 91 concession shops.
Hermes currently generates nearly 13.5% of its total sales in France and 18.5% in the rest of Europe. The Japanese market accounts for 12.5% of sales. This is followed by Asia-Pacific, which generates nearly 35.9% of sales, and the Americas, where the Group generates approximately 17.8% of its sales. The remaining 1.8% is generated in other countries or geographical areas not mentioned here.
Thanks to its strong international presence, Hermes currently employs 14,284 people worldwide.
Find out about the competition for Hermes shares :
Today, Hermes is one of the big names in the luxury sector, which has only a few serious competitors.
- LVMH: More precisely, Hermes' biggest opponent is another French luxury giant, LVMH. This group, otherwise known as Louis Vuitton and Moët Chandon and Hennessy, is indeed one of the international leaders in the luxury goods industry which also specialises in the sale of high-end wines and spirits and which also offers leather goods and luxury fashion items since its merger with Louis Vuitton. This competitor is a direct competitor of Hermes due to its presence in the high-end fashion, jewellery, perfumery and watchmaking markets.
- Gucci and Burberry: Gucci and Burberry can also be accounted for as direct competitors of this company.
Strategic alliances set up by the Hermes Group :
Generally speaking, the Hermes Group is not very focused on partnership strategies with other companies and there are therefore few examples of strategic alliances in recent years. However, it is still important to monitor any mergers that this group is likely to enter into with other companies in similar or very different sectors.
- Apple: Recently, however, we can mention the partnership that Hermes signed with the American group Apple, which was renewed in 2016 following the success of the operation. The two groups have in fact combined their respective talents to develop, produce and sell Apple Watches inspired by the luxury fashion represented by Hermes. These watches use leather straps in several different colours and signed by the House of Hermes. But this alliance goes even further as the watch dials are also inspired by the Clipper, Cape Cod and Espace watches of the Hermes group.
- Volvo: In 2019, the group has also renewed a three-year partnership with the Volvo Cars group on the occasion of the Saut Hermes organised at the Grand Palais from 22 to 24 March. The car manufacturer will thus provide the organisation of this event with a fleet of 12 rechargeable hybrid vehicles to transport the riders and guests.
The advantages and strengths of the Hermes share as a stock market asset :
Of course, the Hermes group's first strong point is the company's positioning in the luxury sector. Indeed, Hermes has succeeded in making itself known throughout the world by developing its network of boutiques in different markets. This represents a real achievement for this primarily family-owned company specialising in luxury goods.
The distribution of Hermes' sales worldwide is also one of the company's advantages. Hermes currently generates more than 32% of its sales in Europe, but also reaches highly coveted markets such as Japan and the Americas, with a strong presence in the United States in particular. The Group also has a strong presence in the Asian market in general and therefore in emerging markets.
Hermes also benefits from a variety of important products that touch almost every area of luxury. Indeed, it is one of the most diversified brands in this sector of activity, with varied product ranges such as leather goods, high-end fashion clothing and accessories, silk and high-end textiles, but also perfumes, tableware and watches. It is thus well protected from the risks associated with a single sector of activity and can diversify its sources of revenue while increasing its presence in the luxury goods world in general.
The Hermes group and more specifically the brand associated with it also has the advantage of being timeless in that it is particularly classic and its image is timeless. Thus, the group suffers very little from the effects of fashion and variable economic contexts that most other companies in the sector are subject to.
Thanks to its strong reputation, Hermes is also able to present a very important negotiating force with its suppliers and distributors. In particular, it can adopt price increase policies by positioning itself solely at the top end of the market and secure its supplies and distribution channels, notably through a very well thought-out policy of actively buying out concessions. These strategies enable it to sustain comfortable margins whatever the economic context.
Over the last twelve years, the Hermes group has attracted investors with consistently positive results and steady growth in profits, which explains the rise in the share price we mentioned earlier in the historical technical analysis. It is indeed the best historical performance in the sector.
Finally, the financial health of Hermes' corporate structure should of course be emphasised, which gives it many advantages, such as the possibility of significant investment in its distribution networks, but also regular share buybacks and the payment of a large interim dividend.
As you can see, the strengths of the Hermes company are numerous and the opportunities for growth are there. Let's now turn our attention to the most negative aspects of this company with its weaknesses and value disadvantages.
Weaknesses and disadvantages of the Hermes share as a stock market asset :
- Firstly, of course, it should be noted that the Hermes group faces rather high fixed costs that make it uncompetitive in an increasingly competitive market.
- In addition, while the Hermes Group has a strong presence in Asia, it is also highly exposed to certain economies in this region. For example, the emerging market of China, which represents a real challenge for many companies, particularly in the luxury goods sector, is also a threat to Hermes due to its strong exposure to this economy. In particular, the specialised press has highlighted the lack of prospects for Macao and Hong Kong and thus the predicted decline in growth for the years to come.
- As the Hermes Group is a French group that distributes its products worldwide, it is of course also subject to the impact of exchange rate fluctuations, which can be negative and lead to a more or less significant loss of profits depending on the economic situation in the Euro zone.
- Finally, we also note that the price of this share on the stock market is highly exposed to the sanction of traders following the publication of results. Thus, when sales growth is not on track, we often see a sharp decline in the share price, as was the case at the end of the summer of 2017.
In order to implement an effective investment strategy for this security, we therefore advise you to take account of these weak points and use them to moderate your judgement and to consider more objectively the possibility of upward or downward trends.