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This article is part of The Luxury Slowdown Survival Guide, a collection of articles that examines the recent industry downturn and the strategies brands may employ to come out of it unscathed.
In an episode of Sex And The City season four from 2001, Samantha Jones wants to buy a $4,000 Birkin bag and is stunned by the five-year waiting list: “Five years for a bag?” she asks the sales associate. “It’s not a bag. It’s a Birkin,” he replies.
More recently, Pierre-Alexis Dumas, the house’s artistic vice president and a sixth-generation member of the family that founded Hermès, told CBS’s 60 Minutes: “It’s a long process. You go to a store. You get an appointment. You meet a salesperson. You talk about what you want. It’s not available. You’ll have to wait. They’ll come back to you. It takes a long time. Eventually, it’s gonna happen.”
So, the wonder of Hermès is not exactly news. What is worth remarking upon, however, is that the French house continues to deliver sales growth in the double digits amid a wider luxury slowdown. When we asked almost 1,000 consumers which luxury brands they’ve purchased from in the past year, Hermès stood out as one of the most popular. With consumer confidence in China at an all-time low and discretionary consumption weak, the French luxury house’s performance seems even more outstanding. “Hermès defies gravity,” says Mario Ortelli, managing director of Ortelli Co.
In the third quarter of 2024, Hermès reported sales up 11 per cent at constant exchange rates to €3.7 billion, while most of its luxury peers were in negative territory. Except for watches, all of the Hermès métiers, including leather goods, ready-to-wear, silk, jewellery, home, perfume and beauty, posted growth in the third quarter. “Thanks to the singularity of its model, Hermès is continuing its recruitment and long-term investments,” said Hermès executive chairman Axel Dumas, also a sixth-generation member of the family, when reporting the earnings.
For the full year 2024, HSBC forecasts organic sales growth of 12.9 per cent year-on-year and EBIT margin slightly below 40 per cent versus a luxury sector average of 20 per cent, making Hermès one of the most profitable companies in the industry. In 2025, Hermès’s sales are expected to grow 11 per cent, versus a sector average of 4 per cent, per HSBC.
Here are six reasons why Hermès continues to outperform its competitors.
1. Pricing power
Prices for iconic products (including Cartier’s Trinity ring, Chanel’s 2.55 flap bag and Louis Vuitton’s Speedy bag) have risen by an average of 54 per cent in Europe between October 2019 and December 2024, HSBC estimates. Erwan Rambourg, HSBC managing director, global head of consumer and retail equity research, calls it “greedflation”. “Many brands went way too high, way too quickly in terms of price increases, whereas Hermès has been a lot more reasonable,” he explains. “Other brands don’t have pricing power anymore because they’ve priced up too much to the point where a lot of consumers are thinking the value proposition is broken. You don’t have that reaction for Hermès.”
To be clear, Hermès is not exactly cheap. It’s already at the very top of the luxury pyramid. “The price point is one of the highest in the market, but the perceived value is also very high. Hermès has never increased prices by 20 per cent. Its consistency and disciplined approach pay off,” says Ortelli.
However, Rambourg notes that Hermès did increase prices by 9 per cent in 2024, “which is more than most brands”, and HSBC estimates the company will increase by another 6 to 7 per cent in late January 2025. “Having been reasonable in 2021, 2022, 2023 [slightly more than 1 per cent, 3.5 per cent and 7 per cent respectively, per HSBC], now they’re playing catch-up.”
Why raise prices a bit more in 2024 and 2025 than in previous years? “Hermès also needs to protect its exclusivity and its positioning versus other brands,” says Ortelli.
2. Demand exceeds supply
A more structural element is that, at Hermès, demand for the iconic handbags exceeds supply. “You’re a lot more resilient if you have waiting lists on handbags,” says Rambourg. “Because when times are tough if your sales associate calls you and says: ‘The handbag we told you you’d have to wait for three years to get, actually, we have it now after two years, do you still want it?’ Yes, you still want it.” Hermès is driven by supply, not demand, Rambourg says, drawing the parallel with the Swiss watch brand Rolex.
The house continues to increase its production capacity: it opened a 23rd leather goods workshop in September 2024. Hermès’s goal is to grow the volume of its leather goods by approximately 7 per cent per year while maintaining its artisan craftsmanship. “One workshop per year is what we manage in order to do things well,” Dumas told reporters at the inauguration of the Louviers workshop in 2023.
This model “enables the group to outperform the sector not only in tougher times but also in good times, with the additional boost in sales of non-leather products [57 per cent of the business in the first half of 2024]”, a recent HSBC note reads. Other métiers, such as ready-to-wear and beauty, can grow faster than leather goods as they aren’t limited by production capacity.
“When the luxury market was booming, the brand took advantage of the opportunity to rapidly develop its ‘secondary’ categories such as watches, beauty and home, while putting the brakes on the development of leather goods to preserve its desirability,” Joël Hazan, previously BCG managing director and partner, says. “In doing so, Hermès has always endeavoured to diversify while remaining extremely faithful to its brand codes and image, notably by carefully choosing which new categories to develop. At a time when the market is slowing down, leather goods, which have remained ultra-iconic, can pick up the slack.”
3. ”Flight-to-quality”
The “flight-to-quality” effect means that in tough times, consumers buy less but buy better. This benefits Hermès, which fiercely protects its know-how. “The pace [of leather goods workshop openings] is constrained by the training time [of craftspeople],” Guillaume de Seynes, executive vice-president, manufacturing division and equity investments, said at the Louviers workshop inauguration. Some of the brand’s handbags take 25 hours to make. They also have the highest resale value among all luxury brands, per Bernstein.
“Hermès embodies the ‘fight-to-quality’ at best. The fact that the resale price of some of its handbags is higher than the retail price reinforces the perception of timelessness and value in the customer’s mind,” Ortelli says.
4. Ultra-wealthy clients
High-net-worth individuals are holding up well, while aspirational customers remain affected by the economy. Hermès is positioned at the top of the luxury pyramid, with ultra-wealthy customers who can afford a €9,400 Birkin 30 Togo. “If you look at a brand like Hermès, Loro Piana, Brunello Cucinelli and a few others that are super high-end, it is logical that very high-end brands have been more resilient than more aspirational brands,” says HSBC’s Rambourg.
This can explain why Hermès is considering couture. “We could do couture — we don’t rule it out,” Dumas told the Financial Times in September. Hermès already has the equivalent of couture for its leather goods called “commandes spéciales”, where its clients can order custom bags in the most precious skins, and it also has high jewellery. In addition, Hermès has Ateliers Horizons, where artisans work on projects beyond the house’s métiers, such as creating the interior of jets or yachts.
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5. Outside the fashion cycle
Hermès doesn’t have a single creative director. Pierre-Alexis Dumas is artistic vice president. Nadège Vanhee-Cybulski and Véronique Nichanian have been artistic directors of women’s and men’s since 2014 and 1988, respectively. Pierre Hardy is in charge of shoes, jewellery, high jewellery and objects of beauty. Christine Nagel is the house’s perfumer, and Gregoris Pyrpylis is creative director of Hermès Beauty.
As a result, there’s no overinflated ego, and it reduces the risk of being too reliant on a very powerful designer. The house is the star. It’s about juggling with very specific codes that have been established for decades and maintaining consistency in the highest regard for quality. “Even when Martin Margiela and Jean Paul Gaultier were at the creative helm of Hermès, their designs were more Hermès than Hermès,” recalls Stéphane Wargnier, professor at Institut Français de la Mode and former head of communications at Hermès. “Margiela because he made the clothing even more luxurious, comfortable and useful. The same can be said of Gaultier, but because he played with all the codes and motifs specific to Hermès: equestrianism, of course, but also the closure of the Birkin and the Kelly.” Margiela and Gaultier were the artistic directors of Hermès between 1998 and 2003 and 2003 and 2010, respectively.
Hermès doesn’t give in to trends or the environment, instead grabbing attention with high-quality materials and a beautiful colour palette. For Spring/Summer 2025, while some designers referenced the complex political situation with upcoming elections in France, the UK and the US, Nichanian went for escapism. She sent out a soft, light collection imbued with pastel tones. “It’s good for us at the moment, and I wish us all a little softness,” Nichanian said after the show.
6. Singular communication
Hermès’s communications strategy is all the more relevant at a time when consumers value authenticity. The house famously doesn’t have a marketing department.
“Whatever we have, we put it on the shelf, and it goes,” Pierre-Alexis Dumas said in the CBS’s 60 Minutes interview when dismissing accusations of Hermès creating artificial scarcity. “This is a diabolical marketing idea that can only come out of people obsessed with marketing. But we don’t have a marketing department at Hermès.”
The product takes centre stage. “Hermès does not have an image policy; it has a product policy,” former CEO Jean-Louis Dumas told Vanity Fair in 2007. “As a result, Hermès says it does not launch products specifically targeting millennials or any other constituency,” wrote Morgan Stanley analyst Édouard Aubin in a note.
The company doesn’t have brand ambassadors either. Instead, it has an annual theme that connects all métiers together. 2025’s theme is “Drawn to Craft”. The house doesn’t splurge on celebrities and influencers; rather, it hires scenographers and architects to conceive events that bring clients in. Anyone who has attended a Hermès flagship store opening party will remember it fondly. This experiential approach, as well as its tone, are spot on: campaign visuals, social media content as well as window displays conceived by Antoine Platteau, director of window design, are whimsical, poetic and playful — reflecting a vision of luxury that doesn’t take itself too seriously.
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