Saturday Interview

Hermès Is So Much More Than Silk Scarves

Patrick Thomas, the chief of Hermès, was at the opening of the store on Wall Street in New York.

 

By TRACIE ROZHON

Published: July 28, 2007

Patrick Thomas, the elusive chief executive at Hermès — elusive to reporters and analysts at least — seemed downright expansive over lunch recently at his hotel only a few blocks from his new store in New York City’s financial district.

The company’s Wall Street store opening was several days away, but the windows were already done: a motorcycle with a black leather outfit on one side ($5,700), and a deconstructed horse sculpture on the other, with a superb black saddle resting on the window ledge, safely behind glass. ($4,500).

For those who think of the company, which has $1.9 billion in sales, as the purveyor of conservative silk scarves with bridle motifs and capacious handbags carried by Grace Kelly, the Hermès windows were eye-opening.

So was Mr. Thomas, who, despite his English-sounding name, is very French. He is the first nonfamily member ever to run the company, which is public but still very much controlled by the descendants of the founder. He offered opinions on the company’s philosophy, its pricing and some as-yet-unannounced new ventures. Following are excerpts:

Q. Do you consider Hermès a daring company?

A. Yes, within reason. The motorcycle is just the modern expression of our origin: the horse. And the horse in the window was made with spare parts from a car. We loved it, we bought it. I have no idea who made it.

Q. Do you ride?

A. No, I did a few times, that’s all. Some members of the family have horses.

Q. Hermès is known as a leather goods brand run by perfectionists. Are you a perfectionist?

A. If you saw the reasons why some things are rejected by our craftsmen, you would say: “These people are crazy.” The quest for perfection is crazy, but we all insist on it.

Q. One luxury analyst told me that Hermès is a model every other luxury brand aspires to, but added that he would like to see better earnings growth and momentum because you are so firmly at the top of the pyramid.

A. I would agree with that statement.

Q. And what about your sales in Japan?

A. Yes, there has been sort of a stabilization of that market; it is still a very big market, it is still a quarter of our business.

Q. You have two classes of stock ownership, don’t you?

A: Yes, there are active partners and there are sleeping partners. The active partners make up the controlling board. They appoint the C.E.O. They can sack me tomorrow morning. But they give me more or less freedom — just like a normal company.

Q. I’ve heard that the family members have a pact not to sell their shares.

A. Yes, the family has a pact to hold onto its shares for at least six years; it’s a general pact. It’s clearly not their intention to sell, but as you say, never say never! As long as the fifth generation is around ... I think the sixth generation will stick to it, too. There is enormous loyalty which has been transmitted to the children.

Q. What’s happening with the luxury market? Many have predicted it will start to weaken, and some companies have in fact weakened.

A. Today much of what we call luxury is no longer luxury. Call it luxury if you want, but some companies no longer have the quality. At Hermès, a woman walked in with a saddle not long ago, and she complained it needed restitching. We checked the records — we keep all records, even of repairs — and it was her grandmother’s saddle, purchased in 1937. We fixed it, of course.

Q. What fields are you branching into? I know last year you began selling smaller, lighter and cheaper silk scarves — $205 versus $325?

A. We are planning now for the next step: to develop — to extend and boost — the house. We call it art of the house: bath towels, robes, vases, furniture, luminaires. There are plenty of things in the pipeline: new lines of ties, dresses, jewelry.

Q. Your Birkin handbags sell for as much as $10,000 — maybe more, depending on the type of skins used. Is there any limit, a point where consumers will say: “No, not one euro more?”

A. There is always a price limit. The best example is Japan. This year the yen went down sharply against the euro, so we had to increase our prices. Many people told us they were not going to pay; everyone is sensitive to price.

Q. I was surprised to see Hermès in an airport somewhere. Is an airport boutique consistent with your company’s refined image