La Montre Hermès has new ambitions

Luc Perramond, CEO of La Montre Hermès: This could indeed prove a difficult year for everyone. Not that this is the first crisis we’ve faced. With more than twenty years in the business, including thirteen years at TAG Heuer and seven with H. Stern, I think I know what we’re up against. Having said that, I have to say this is the most brutal crisis I’ve ever seen. A good many structural changes will ensue.

Consumption habits will change. Behaviour will evolve. The end customer, and this is something we observed at this year’s Baselworld, is looking for safe havens. These are values which can draw on an authentic history and true expertise, the ones which can lay claim to a proven heritage. In other words, the long-established brands which have made their mark. In this respect, Hermès is ideally positioned.

I’ve used these three months to penetrate the spirit of the brand. Hermès is distinguished by its expertise and exclusivity, and has carved out a unique position in the luxury environment. The most fitting definition would be creative craftsmanship. This perfectly illustrates the Hermès spirit, a combination of savoir-faire, tradition and excellence in each of our professions. We are entirely devoted to becoming masters of our craft and constantly seek ways to perfect our expertise. A Hermès product is a piece of art that will accompany its owner throughout their life.

In the short term, meaning 2009, to successfully steer the company through this turbulent period. It’s our job to organise ourselves so as to maintain sales.

We are determined to defend our position as a renowned watch brand and to continue to upgrade our collections at our own pace. We have strengthened our in-house competencies and management, be this in creation, production, marketing or finance. We have deployed new technical skills in-house too. The seven members of our executive committee have 120 years of combined experience in watchmaking.

We will continue to achieve excellence in every possible way. One of these ways will be to give particular emphasis to mechanical watches, but with an original positioning that is rooted in Hermès’ values. This means a unique relationship with time, something which our Cape Cod Grandes Heures model embodies especially well. In the space of a few years, mechanical watches have gone from 2% to 15% of our revenues [€94.5 million in 2008]. Mechanical models will play a key role in establishing Hermès as a legitimate watch brand. Our first in-house mechanical movement, H1, produced in collaboration with Vaucher Manufacture in which we have a 25% stake, is part of this strategy. The H1 will be available to customers again this year, notably with our Cape Cod collection.

Yes and no. No, because the women’s segment will always be strong at Hermès. Some 70% of our customers are women. Yes, because we clearly want to increase the percentage of male customers. Ultimately, we could be looking at a 60:40 ratio. We have the potential, and the legitimacy, to more strongly target men.

Our quartz movements come from ETA. We also use Valjoux for our mechanical calibres (7750).

We produce some 100,000 watches a year with an average retail price of €1,780. Such a reasonable price means it is relatively easy for someone to enter the magical world of Hermès. Obviously, our mechanical watches are positioned at a higher price, as are our jewellery watches.

We have a headcount of 105 people at our head office in Brügg, in the canton of Berne.

In two ways. Firstly, in our own boutiques. There are 300 Hermès stores around the world. Having this direct contact with the end customer is an undeniable advantage in the present climate. In fact since the beginning of the year, sales in our boutiques have increased. Secondly, we have an outside network of 800 points of sale that provides worldwide coverage. There is, nonetheless, potential for the brand to grow in the United States, Eastern Europe, Russia, the Middle East, China and South-East Asia. Clearly then, we have plenty to keep ourselves busy.