Hermes prepares to give up its privacy: Roger Tredre looks at a luxury goods maker's flotation plan

HERMES has always been the most private of private companies. But not for much longer. In a few months the French luxury goods group known for its printed silk square scarves and saddle-stitched leather products will become the latest in a line of fashion names joining the financial markets.

The company is due to go public on 3 June, when it will float part of its equity on the second market in Paris. It will be a traumatic step. After 156 years, the firm is still dominated by three branches of the founding family, who own 86 per cent of the stock.

Jean-Louis Dumas, chairman, said: 'We took this decision to respect the promise we made four years ago, and to allow family and institutional shareholders to realise their capital.'

The initial public offering is predictably low-key. Share capital is to be increased by 4 per cent while institutional investors will sell a further 14 per cent stake on the market.

The family will continue to own 81.4 per cent. The offer price is likely to be around Fr13,000 ( pounds 1,600) a share, giving a price-earnings ratio of 30.

The news has aroused intense interest in Paris. Hermes is a French institution with a history that makes even Yves Saint Laurent and Chanel seem like newcomers.

At 24 Faubourg Saint-Honore, company headquarters, it is tempting to believe that little has changed since the 1950s, when Grace Kelly gave her name to the box calf bags. The house of Hermes knows the value of its heritage, dating back to Thierry Hermes' horse harness business, founded in 1837. The message is continually reinforced by the positioning of equestrian memorabilia around the stores and the publication of a biannual glossy magazine, Le Monde d'Hermes.

However, in recent years, Hermes has felt the chill running through the international luxury goods market. After consistently strong growth throughout the Eighties, turnover stagnated - Fr2.45bn in 1990, Fr2.4bn in 1991 and Fr2.45bn in 1992. Net profits dipped from Fr168m in 1990 to Fr121m in 1991 before rising again to Fr176m last year.

French analysts believe the firm is poised for steady growth. Mr Dumas predicts a 10 per cent rise in sales this year after an encouraging first quarter. Three new shop openings, in Berlin, Bologna and Barcelona, are scheduled, bringing the total number of company-owned stores to 59.

It seems that Hermes has weathered a turbulent period rather more successfully than other names in the luxury goods market. Much of the credit goes to Mr Dumas, chairman since 1978, who has overseen the company's international expansion.

Mr Dumas, 55, a fifth-generation member of the family, is a much-admired polymath, equally at home scanning the pages of Les Echos, the financial daily, or discussing the merits of the latest winner of the Prix Goncourt, the literary prize.

He insisted that Hermes self-fund its growth during the rapid expansion of the 1980s. This policy affected margins, but today the company's debt is negligible.

The chairman was also wise to avoid the lure of licensing. Hermes makes almost all of its products itself, and quality control is strict.

Its products do not come cheap. A tie sells for pounds 59, a 90cm square of printed silk for pounds 135, a Kelly bag for pounds 1,690. Even so, in the run-up to Christmas the flagship store in the Faubourg Saint-Honore sells scarves in up to 35 colourways at the rate of three a minute. Sales of printed silk scarves and ties account for more than 30 per cent of turnover.

Hermes also sells leather goods, watches, jewellery and perfumes. Recently, clothing has come to the fore. Claude Brouet, a former editor of Marie Claire, has revamped the women's wear range, while Veronique Nichanian, a designer formerly with Cerruti, has transformed menswear.

Mr Dumas dismisses the current problems affecting the luxury goods market as no more than cyclical. But he speaks from a position of strength.

Hermes has struck a delicate and rare balance, refusing to cut corners on quality while maintaining sound financial controls. Many companies are having to sacrifice elements of the former to maintain the latter.

The avoidance of licensing deals may prove the master stroke. Other long-established firms, which have lost precious cachet by ill-considered licensing ventures, may not face the future with equal confidence.

(Photograph omitted)

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Content Writer - Global Financial Services

£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Web Developer - PHP

£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Field Sales Consultant - Financial Services - OTE £65,000

£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Loan Underwriter

£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

Day In a Page

A nap a day could save your life - and here's why

A nap a day could save your life

A midday nap is 'associated with reduced blood pressure'
If men are so obsessed by sex, why do they clam up when confronted with the grisly realities?

If men are so obsessed by sex...

...why do they clam up when confronted with the grisly realities?
The comedy titans of Avalon on their attempt to save BBC3

Jon Thoday and Richard Allen-Turner

The comedy titans of Avalon on their attempt to save BBC3
The bathing machine is back... but with a difference

Rolling in the deep

The bathing machine is back but with a difference
Part-privatised tests, new age limits, driverless cars: Tories plot motoring revolution

Conservatives plot a motoring revolution

Draft report reveals biggest reform to regulations since driving test introduced in 1935
The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

'A subversive brothel keeper and Communist'

Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

BBC heads to the Californian coast

The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

Victorian fraudster who shook the Bank of England

Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

Car hacking scandal

Security designed to stop thieves hot-wiring almost every modern motor has been cracked
10 best placemats

Take your seat: 10 best placemats

Protect your table and dine in style with a bold new accessory