Hermes International SCA, a paragon of luxury and refinement, stands as a beacon of timeless elegance in the realm of fashion and craftsmanship. Established in the heart of Paris, Ile-De-France, this iconic company has woven a tapestry of unparalleled artistry and innovation since its inception.
The uniqueness of Hermes lies not just in its exquisite products but in the convergence of tradition and modernity. The company’s commitment to preserving age-old artisanal techniques while seamlessly integrating contemporary design sensibilities has allowed it to navigate the currents of time with unparalleled grace.
Diverse Segments:
Hermes has sculpted its identity across diverse segments, each a testament to the brand’s multifaceted excellence. The Leather Goods and Saddler segment, encompassing an array of products such as bags, riding gear, diaries, and small leather goods, mirrors the brand’s roots in equestrian craftsmanship.
Six Generations of Success:
Delving deeper into the annals of Hermès reveals a journey spanning six generations, a narrative woven with threads of resilience, creativity, and unwavering dedication. The company’s ability to adapt to the ever-evolving landscape of fashion and luxury has positioned it as a custodian of heritage, continuously pushing boundaries while staying rooted in its founding principles.
Global Headquarters in Paris:
The heartbeat of Hermуs resonates from its global headquarters in Paris, a city synonymous with art, culture, and haute couture. The decision to establish and maintain the company’s headquarters in this cultural epicenter not only aligns with its commitment to excellence but also strategically places it at the nexus of global fashion influence.
Business Expansion and Innovation:
While grounded in tradition, Hermes has unfurled its wings globally, with stores gracing key fashion capitals such as New York and Tokyo. The brand’s expansion beyond its French roots mirrors its global resonance, catering to a discerning international clientele. Embracing innovation, Hermès has seamlessly integrated technology, from crafting revolutionary bag closures to establishing a robust online platform—a testament to its ability to blend heritage with modernity.
In the following sections, we embark on a journey through key milestones, innovations, and iconic products that have not only defined Hermès but have also etched an indelible mark on the landscape of luxury and fashion. From its inception in 1837 to the present day, Hermes remains a paragon of excellence, a saga of craftsmanship that transcends temporal confines.
Foundation (1837):
Hermes traces its origins back to 1837 when the founder, Thierry Hermes, established the company specializing in crafting horse harnesses. Starting as a saddle workshop, the company quickly gained a reputation for producing high-quality equestrian products.
Some pivotal decisions in the company’s early years significantly influenced its future success. Firstly, the choice of the equestrian industry, as horses were the primary mode of transportation at that time. Secondly, establishing production in Paris, a fashion hub influencing various aspects of life. Thirdly, the emphasis on craftsmanship, with quality components and the distinctive saddle stitch, catapulted Hermès into the limelight, capturing the attention of influential patrons, including Napoleon III and the Russian imperial court.
The iconic Hermès logo, depicting a horse-drawn carriage, originated from this era. The creation of the first bag for horse harnesses and luggage opened new horizons for the company, birthing a legend.
Zipper (1922):
In 1922, Emile Hermès, during a visit to a Canadian exhibition, encountered a revolutionary «close all» system on the hood of a military car, now known as a zipper. This innovation was later introduced to Hermès bags, creating a sensation in the fashion world.
First Silk Scarf (1937):
The Hermes silk scarves are considered artistic masterpieces, offering wearers a touch of the divine, akin to experiencing opera, poetry, or contemplating the Mona Lisa. Woven from silk and weighing a mere 65 grams, these scarves became coveted accessories for celebrities and royalty alike.
Notably, protocol dictated that first ladies couldn’t dress entirely in foreign attire. However, figures like Grace Kelly, later Princess of Monaco, and Queen Elizabeth were exceptions, demonstrating the versatility of Hermes scarves.
The Hermes silk scarf, introduced in 1937, became a symbol of luxury and sophistication.
First Silk Tie (1951):
The creation of the Hermes tie reflects the company’s entrepreneurial acumen. In Cannes, men not adhering to the casino’s dress code were denied entry. The nearby Hermes store conveniently provided the missing accessory, subsequently becoming an integral element of men’s wardrobes.
Kelly Bag (1951):
Robert Dumas orchestrated one of Hermes’ greatest successes with the introduction of the Kelly bag, named after the renowned Grace Kelly. After initially using the bag on film sets, Grace Kelly purchased it for herself, later utilizing it to conceal early signs of pregnancy. This iconic moment propelled sales to unprecedented heights, leading to the official renaming of the bag to the Kelly bag in 1977.
Hermes International S.A. (1970s):
The company transitioned to Hermes International S.A. in 1971, going public while the family retained control with over 70% ownership. Hermes expanded globally, establishing stores in key fashion capitals, and continued diversifying its product lines, including perfumes, watches, and ready-to-wear fashion.
Iconic Products and Collaborations:
Hermes has elevated the concept of fashion collaborations to an art form, seamlessly blending luxury with artistic expression. The brand’s partnerships with renowned artists and designers have resulted in limited-edition collections that transcend mere commercial ventures, transforming into collectible pieces of art.
From collaborating with surrealist artist Salvador Dalí to contemporary designers like Jean Paul Gaultier, Hermes has curated a portfolio of exclusive creations that marry traditional craftsmanship with avant-garde creativity. These collaborations not only showcase the brand’s adaptability but also underscore its commitment to pushing boundaries and redefining luxury.
Birkin Bag as Investments:
The Hermes Birkin Bag, more than a fashion accessory, has ascended to the echelons of investment-worthy assets, transcending its utilitarian purpose to become a coveted collector’s item. The allure of the Birkin Bag as an investment lies not only in its exquisite craftsmanship and unparalleled luxury but also in its ability to outperform traditional investment avenues.
Performance on the Auction Stage:
The global fascination with the Birkin Bag manifests most prominently on the auction stage, where these handcrafted masterpieces fetch staggering prices, setting records and establishing themselves as blue-chip investments. Auction houses like Christie’s and Sotheby’s have become arenas where the Birkin Bag’s value skyrockets, turning each auction into a spectacle of opulence and exclusivity.
Sotheby’s and Christie’s Auctions:
Sotheby’s and Christie’s, renowned auction houses with a storied history of curating and selling exceptional pieces, have witnessed the Birkin Bag’s meteoric rise as an investment-grade collectible. The auctions not only provide a platform for enthusiasts to acquire these rare gems but also serve as a barometer for the bag’s financial prowess.
The bidding wars that unfold at these auctions underscore the Birkin Bag’s status as a tangible asset that transcends the realms of fashion and craftsmanship. Collectors, investors, and fashion connoisseurs converge in pursuit of these iconic pieces, contributing to an atmosphere of exclusivity and prestige.
Record-Breaking Sales:
The Birkin Bag has etched its name in the annals of auction history through record-breaking sales. One such remarkable instance is the sale of a pink Hermes Birkin bag at a Christie’s auction in Hong Kong for an astounding USD 380,000. This figure not only underscores the bag’s desirability but also positions it as a high-yield investment that commands attention on the global stage.
The Holy Grail of Birkin Bags, the Hermes Himalaya Birkin, achieved an unprecedented milestone by fetching USD 500,000 at auction. This exorbitant price tag solidifies the bag’s reputation as not just a fashion accessory but a tangible asset capable of yielding substantial returns.
Waiting Lists and Scarcity:
The mystique surrounding the Birkin Bag is further amplified by the scarcity deliberately maintained by Hermes. Waiting lists for these coveted bags can stretch for years, contributing to their exclusivity and increasing their allure as investment-grade assets. The deliberate limitation of the supply adds a layer of rarity that enhances their value over time. Now the famous dialogue between sales person in Hermes and Samantha in «Sex and the City» makes sense:
“IT’S FOUR THOUSAND” “I KNOW” “AND THERE’S A WAITING LIST” “I ASSUMED” “FIVE YEARS” “FOR A BAG?” “IT’S NOT A BAG, ITS A BIRKIN”
Average Annual Returns According to Baghunter Research:
Delving into the financial performance of the Birkin Bag as an investment, Baghunter research conducted between 1980 and 2015 reveals an impressive average annual return of 14.2%. This surpasses the performance of traditional investments such as the S&P 500 (11.66%) and Gold (1.9%), positioning the Birkin Bag as a high-performing alternative investment.
Collectors’ Craze and Cultural Phenomenon:
The Birkin Bag’s status as a cultural phenomenon and collectors’ item contributes significantly to its investment appeal. Its journey from the ateliers of Hermes to the auction podiums reflects a confluence of craftsmanship, luxury, and financial savvy, making it a prime asset for those seeking to merge passion with profit.
As we navigate the auction houses where the Birkin Bag commands attention and record-breaking prices, it becomes evident that this iconic accessory has transcended fashion to become a tangible investment—a testament to the enduring allure of Hermès craftsmanship. The waiting lists, scarcity, and auction theatrics only serve to augment the mystique of the Birkin Bag as an investment-grade treasure.
Hermes Rating and Competitors
As of the end of 2023, Hermes achieved an outstanding rating of 132%, surpassing the Eyestock benchmark of 100%. Hermes stock is considered an ideal investment, aligning with Eyestock’s philosophy of buying and holding quality stocks.
Please check Eyestock’s selection of Fashion Stocks for more ideas
Hermes Financial Performance
As of end 2023
Revenue: EUR 6.73 billion
Net Income: EUR 2.10 billion
Gross Margin: 72% (demonstrating economies of scale)
Net Profit Margin: 32% (indicating a competitive advantage)
CFO/NI: 100% (reflecting high-quality earnings)
Hermes Financial Position
Hermes exhibits a robust financial position with rising assets ( EUR 20.45 billion) accompanied by rising equity ( EUR 15.20 billion). The company maintains a modest debt of EUR 2.1 billion, resulting in a favorable coverage ratio.
CFO/Debt of 2.14, ensuring solid long-term solvency. Key metrics such as Debt/Equity (0.14) and Current Ratio 4.29 further highlight its solid solvency, both in the long term and short term.
Hermes Efficiency
Efficiency metrics showcase Hermes effectiveness in utilizing its resources:
ROE (Return on Equity): 32% (excellent)
ROIC (Return on Invested Capital): 51% (excellent)
Sustainability Analysis
Average growth rate for 2 years is 33%
Average growth rate for 5 years is 48%
Valuation
Multipliers P/E trailing is 46.66, P/E forward 56.29
With an average value 2044.41 EUR, and 1581.63 EUR as minimal value
According to Eyestock’s relative valuation model, RMS is fairly priced, indicating an upside potential of 25%. The higher the share price to it’s Max value of EUR 2897.07 the more riskier the investment. Make sure you put an alert for average valuation at Eyestock so as not to miss the timing to enter the RMS stock.
Dividends Indicators:
Payout Ratio: 40.12%
Dividend Yield: 0.75%
Last Dividend Payment 13.02.2024 EUR 3.50
Annual Dividend: EUR 16.50
RMS stock is suitable for investors seeking stable income through dividends.
Opinion:
Based on research, RMS stands out as a top-performing stock in the Consumer Discretionary Sector, particularly in the Textiles, Apparel & Luxury Goods industry, not only in Europe but globally, with a robust rating of 132%. Despite the cyclical nature of the Consumer Discretionary sector, Hermès is well-positioned to weather economic fluctuations, thanks to its strong brand and strategic approach.
Hermes remains one of the few independent companies in the Textiles, Apparel & Luxury Goods sector, upholding its long-term principles of creative freedom, exclusive handmade craftsmanship, and a global distribution network.
The company’s recent expansion into Tokyo and Kuala Lumpur reflects its commitment to a personalized multichannel retail strategy. The COVID-19 pandemic accelerated Hermes’ e-commerce development, with the company successfully launching its online platform over the past six years.
The combination of family-owned business independence, stringent financial management, clear governance structure, and limited product availability allows Hermes to perform well even during challenging times. The company’s resilience is evident in its consistent performance, with no sell-offs or holiday discounts.
In conclusion, RMS stock presents an enticing investment opportunity for thematic investors seeking dividends. Its solid financial position and strategic industry placement make it suitable for Buy & Hold investors.
