Hermès Saddles up Against LVMH
Christmas at Hermès this year will see the family heirs fighting to retain control of the 173-year-old Paris fashion house which started life making fine saddles and equestrian accessories for the hunting and racing fraternities.
Thierry Hermès founded his firm near the Grands Boulevards in Paris in 1837, opening his most famous store at 24 Faubourg Saint-Honore, near the Elysee Palace, some 43 year later in 1880. Today, Hermès runs an exclusive network of 261 luxury outlets selling leather products, ties, men’s and women’s ready-to-wear, perfume, diaries, watches, hats, gloves , shoes, tableware and jewelry. The house employs some 7000 people worldwide, and posted sales of €1.91 billion in 2009.
Faubourg Saint-Honore has been a not-to-be-missed stop for world celebrities for decades, among them: Mistinguett Arletty, Christian Berard, Sacha Guitry, Jean Cocteau, Colette, Jacques Prévert, Louis Jouvet, Fujita, Jean-Louis Barrault, Louise Vilmorin, the Duke and Duchess of Windsor, Josephine Baker, Ingrid Bergman, Humphrey Bogart and Lauren Bacall, Jacqueline Kennedy, Audrey Hepburn, Brigitte Bardot, Bourvil, Andy Warhol and Philippe Noiret.
Today it is discreetly but firmly fending off the unwanted embrace of another French-owned global fashion name, LVMH Moët Hennessy Louis Vuitton Group, driven by the luxury market’s most aggressive predator Bernard Arnault.
Next Friday December 3rd , the sixty or so heirs who still control more than 73% of Hermès will meet along with their financial advisors — Bank of America Merrill Lynch and BNP Paribas — to plan Hermès defence, according to Journal du Dimanche.
Hermès’s ownership structure giving most decision-making power to a single holding company, makes it extremely difficult for an outsider to take full control without full family approval. The Hermès clan has made it clear that that is a fate not on the horizon.
Patrick Albaladejo, Hermès’ deputy managing director— and not part of the clan— says Hermès younger generations are just as devoted to the business as their parents were. The company is registered as a societe en commandite par actions a structure that gives managing partners veto power on most decisions made by shareholders. Emile Hermès SARL, the holding company is open only to direct descendants of the founders.
LVMH, the world’s leading luxury retailer (Givenchy, Dior, Guerlain, Chandon and Dom Perignon champagnes) is indeed now a significant shareholder holding more than 17% of Hermès. LVMH October 24 told stockmarket regulators it had upped its stake in Hermès International to 14.2% but denied it wanted to take it over.
According to the French news agency AFP: “There has been speculation about the future of Hermès, known for its fine leather goods and silk scarves, since the death in May 2010 of its charismatic head Jean-Louis Dumas. Previously LVMH owned less than 5% of Hermès shares, the threshold beyond which shareholders must declare themselves. Around 20% of Hermès’ capital was floated in 1993.”
The Puech, Dumas and Guerrand families’, direct descendents of the house’s founder, Thierry Hermès, say they are fully committed and “working hard to protect their crown jewel”.
LVMH CEO Bernard Arnault continues to insist that he is interested in building a stake “peacefully.” “Our presence in the capital of Hermès presents no risk to the firm nor to its family control. Quite the opposite,” he told Le Figaro, after leaders of Hermès had described his increased holding in the business as “unfriendly.”
To justify its pressure on Hermès, Bernard Arnault and his entourage have spoken darkly of “rumoured” foreign ambitions for the brand, pointing to unnamed Chinese investment funds and to Richemont, the Swiss group led by Johann Rupert — ranked number two in the world of luxury. Rupert has firmly denied any interest.
In truth though most analysts believe he is merely applying his usual aggressive tactics to yet another French family-controlled business he wishes to acquire.
Hermès, the God of Luxury By Vipère Salomé (ack: www.prestigium.com)
In 1878, Charles-Emile Hermès son of Thierry, the house founder, takes over and in 1900, Hermès celebrates the new century by creating an ingenious bag designed for riders. It unique selling point is as a place to store saddles and boots. Later a scaled down version becomes the “Kelly” bag winning the favour of Princess Grace of Monaco to become a must-have for generations of women worldwide.
In 1914, Adolphe Hermès and his younger brother Emile-Maurice, grand-son of the founder, gain the exclusive rights in France for the American-invented zipper which he soon adapts to leather goods and fashion. Travel trunks are now the baggage of the age and those who know how to work leather have a strong card to play.
The House of Hermès holds a fabulous collection of some 10,000 objects gathered by the founder, a passionate traveller and equestrian expert.
Photos from the Hermès collection.
Story: Ken Pottinger