Michael Tonello's Blog, page 27
March 26, 2014
Hermès' Message to LVMH: Cash Out
New Chief of Design House Says Family Will Fight to Remain IndependentBy Christina Passariello/Wall Street Journal
PARIS—The founding family has taken the reins again at Hermès, battening down the hatches after facing an incursion from a rival. Last month, Axel Dumas, a 43-year-old former banker, took over as chief executive of the French luxury-goods house, succeeding Patrick Thomas, the only outsider to ever run the company, famous for its Kelly bags and silk scarves. Mr. Dumas and his cousins, members of the sixth generation, have stepped into the breach in response to LVMH Moët Hennessy Louis Vuitton MC.FR +1.22% building up a 23% stake. The family pooled 50% of the company's capital in a trust to keep it out of the hands of the luxury juggernaut. But LVMH hasn't signaled any intention of backing down.It is easy to understand why Hermès would be appetizing prey. The company is positioned at the top end of the luxury-goods category and has proven immune to the slowdown in China that is affecting many of its competitors. Hermès' biggest conundrum is how to keep up with demand.In an interview from his eighth-floor office with a view onto Montmartre, Mr. Dumas sat down with The Wall Street Journal to discuss family unity, how he deals with the unwanted shareholder and why price isn't an indicator of exclusivity. Excerpts:
Family luxury-goods house Hermès is famous for its Kelly bags and silk scarves. Getty Images for IMG WSJ: What does it change for Hermès to go back to being run by a family member?Mr. Dumas: I'm the seventh CEO of Hermès, and part of the sixth generation [of the family]. When the board selected me, there was more of a discussion of an outsider or an insider rather than a family member or not. Eventually they decided on an insider who happens to be a family member.WSJ: How did the family select you to run the company?Mr. Dumas: We let our board members who are not part of the family select from the top 10 or 20 managers. If you try to organize a beauty contest between members of the family, it is a recipe for resentment a few years after. 
'We are fighting to keep Hermès independent,' says Axel Dumas, chief executive of the luxury-goods house. 'It will be the fight of our generation.' Charlotte Gonzalez for the Wall One thing which is always important in a family business is how you arrive at a decision. When you have a very small number of family members, it is easy to be in unanimity. When you are a very large family, more than 200, it is always the majority, you just vote on it. In my generation, there are over 40 members. So it's a mix of the two. We still long for unanimity. WSJ: How does your family maintain its traditions? Mr. Dumas: We've been raised together. With all my first cousins, we shared the same country house (in Normandy). But there was no specific time where we all would come together and wear nametags. There's been a trend in Europe of consolidation, not only in luxury, where a family company, because of a question of size, is absorbed in a larger conglomerate. It is very important that the family is never complacent and keeps its entrepreneurial spirit.
WSJ: Was LVMH's entry into your capital due to the family being complacent?Mr. Dumas: It surprised everyone. We are fighting to keep Hermès independent. It will be the fight of our generation. We are a company with 177 years of history. So we've seen struggle from time to time. We invested all our money in 1928 to open a store in New York, just before the Great Depression. It was 10 years of trauma for the family thanks to that.WSJ: Now that you are the public face of the family, what kind of relationship will you have with LVMH?Mr. Dumas: As a CEO, my role is to grow the company as much as possible, taking into account the global interest of all the shareholders.WSJ: Including LVMH.Mr. Dumas: The best benefit they can have is by realizing the capital gain on their shares.WSJ: So you are encouraging them to sell?Mr. Dumas: It would create great results that will increase their profit.WSJ: Your sales have tripled in the past 10 years. Where will Hermès be 10 years from now?Mr. Dumas: It is not about a set of figures by itself. It is about the growth of all our métiers [product lines]. We are going to continue to invest in our production facilities. We want to have Hermès be even more diverse and balanced. Likewise in our geographical expansion. In the 19th century, we were centered around the Atlantic Ocean. Probably in 20 years we will be centered around the Pacific Ocean. From the West Coast of the U.S. to China to Southeast Asia.WSJ: There is a paradox in luxury, of selling lots of goods that have an aura of exclusivity. How do you manage this paradox?Mr. Dumas: When we have had discussions about changing the way we do things to produce more, we always say no, to stay authentic. My great-grandfather Emile Hermès was sent to the U.S. during the First World War to buy some leather for the French cavalry and to look at Fordism—assembly line production. He was very impressed. He came back to Hermès and wrote a memo: "Never for us." WSJ: Every year you are able to make more bags because you increase your production facilities. Even at your high price point, are you not concerned about the ubiquity of your bags?Mr. Dumas: I don't think the price point is the relevant measure of our exclusivity. I am a little bit always taken aback when I hear, "We want to be more exclusive so we're going to sell more expensive bags." I think that the volumes that we have are still quite insignificant compared with the rest of the market. WSJ: Your prices have risen much faster than inflation. To what extent are consumers beginning to resist these price increases?Mr. Dumas: I think we are very reasonable because there is no price marketing at all. It is just due to wage increases in France and the cost of the material. The price of good cashmere has increased 20%. The divide is not based on price, it's based on what you get for the product. That's why you see that the high-end luxury market did well. The lower end of the market is doing well also. Because for the two of them you get what you pay for. The middle—when the construction is closer to the lower end but you sell it at a price closer to high end—suffers the most in our industry.WSJ: You said that your prices are determined by costs. At the same time, you recently announced a record high operating margin. How do you justify that?Mr. Dumas: It's our operating margin. I won't say we've seen a great change in our gross margin. In each métier, we try to have them the same profitability, so we can have a huge spike in one and a decrease in the other and it won't have a major impact on the operating margin.WSJ: The crackdown on gifting in China has affected luxury-goods growth. How long do you think it will last?Mr. Dumas: When the big anticorruption wave ends, the attitude toward consumption will be easier. We are less affected because we're very specific about what kinds of credit cards we take. When you're buying for yourself, usually you pay with your own credit card and not a gift card that has been given by someone else.WSJ: How is Hermès affected by the slow economic growth in France?Mr. Dumas: Our sales in December were telling of the evolution. We had more customers than before, but the average basket was lower. We see that consumers were quite cautious about the economic perspective. The main issue in France globally is our unemployment, which is at an unsatisfactory level. Sometimes we are very good in productivity, but it doesn't help employment. WSJ: Your ancestors often ran Hermès until they were 80 years old. Is this a lifelong commitment for you?Mr. Dumas: As long as the family will be happy, and as long as I believe I can serve Hermès in a good way, I will be delighted. I think it's the best job in the world.
PARIS—The founding family has taken the reins again at Hermès, battening down the hatches after facing an incursion from a rival. Last month, Axel Dumas, a 43-year-old former banker, took over as chief executive of the French luxury-goods house, succeeding Patrick Thomas, the only outsider to ever run the company, famous for its Kelly bags and silk scarves. Mr. Dumas and his cousins, members of the sixth generation, have stepped into the breach in response to LVMH Moët Hennessy Louis Vuitton MC.FR +1.22% building up a 23% stake. The family pooled 50% of the company's capital in a trust to keep it out of the hands of the luxury juggernaut. But LVMH hasn't signaled any intention of backing down.It is easy to understand why Hermès would be appetizing prey. The company is positioned at the top end of the luxury-goods category and has proven immune to the slowdown in China that is affecting many of its competitors. Hermès' biggest conundrum is how to keep up with demand.In an interview from his eighth-floor office with a view onto Montmartre, Mr. Dumas sat down with The Wall Street Journal to discuss family unity, how he deals with the unwanted shareholder and why price isn't an indicator of exclusivity. Excerpts:
Family luxury-goods house Hermès is famous for its Kelly bags and silk scarves. Getty Images for IMG WSJ: What does it change for Hermès to go back to being run by a family member?Mr. Dumas: I'm the seventh CEO of Hermès, and part of the sixth generation [of the family]. When the board selected me, there was more of a discussion of an outsider or an insider rather than a family member or not. Eventually they decided on an insider who happens to be a family member.WSJ: How did the family select you to run the company?Mr. Dumas: We let our board members who are not part of the family select from the top 10 or 20 managers. If you try to organize a beauty contest between members of the family, it is a recipe for resentment a few years after. 'We are fighting to keep Hermès independent,' says Axel Dumas, chief executive of the luxury-goods house. 'It will be the fight of our generation.' Charlotte Gonzalez for the Wall One thing which is always important in a family business is how you arrive at a decision. When you have a very small number of family members, it is easy to be in unanimity. When you are a very large family, more than 200, it is always the majority, you just vote on it. In my generation, there are over 40 members. So it's a mix of the two. We still long for unanimity. WSJ: How does your family maintain its traditions? Mr. Dumas: We've been raised together. With all my first cousins, we shared the same country house (in Normandy). But there was no specific time where we all would come together and wear nametags. There's been a trend in Europe of consolidation, not only in luxury, where a family company, because of a question of size, is absorbed in a larger conglomerate. It is very important that the family is never complacent and keeps its entrepreneurial spirit. WSJ: Was LVMH's entry into your capital due to the family being complacent?Mr. Dumas: It surprised everyone. We are fighting to keep Hermès independent. It will be the fight of our generation. We are a company with 177 years of history. So we've seen struggle from time to time. We invested all our money in 1928 to open a store in New York, just before the Great Depression. It was 10 years of trauma for the family thanks to that.WSJ: Now that you are the public face of the family, what kind of relationship will you have with LVMH?Mr. Dumas: As a CEO, my role is to grow the company as much as possible, taking into account the global interest of all the shareholders.WSJ: Including LVMH.Mr. Dumas: The best benefit they can have is by realizing the capital gain on their shares.WSJ: So you are encouraging them to sell?Mr. Dumas: It would create great results that will increase their profit.WSJ: Your sales have tripled in the past 10 years. Where will Hermès be 10 years from now?Mr. Dumas: It is not about a set of figures by itself. It is about the growth of all our métiers [product lines]. We are going to continue to invest in our production facilities. We want to have Hermès be even more diverse and balanced. Likewise in our geographical expansion. In the 19th century, we were centered around the Atlantic Ocean. Probably in 20 years we will be centered around the Pacific Ocean. From the West Coast of the U.S. to China to Southeast Asia.WSJ: There is a paradox in luxury, of selling lots of goods that have an aura of exclusivity. How do you manage this paradox?Mr. Dumas: When we have had discussions about changing the way we do things to produce more, we always say no, to stay authentic. My great-grandfather Emile Hermès was sent to the U.S. during the First World War to buy some leather for the French cavalry and to look at Fordism—assembly line production. He was very impressed. He came back to Hermès and wrote a memo: "Never for us." WSJ: Every year you are able to make more bags because you increase your production facilities. Even at your high price point, are you not concerned about the ubiquity of your bags?Mr. Dumas: I don't think the price point is the relevant measure of our exclusivity. I am a little bit always taken aback when I hear, "We want to be more exclusive so we're going to sell more expensive bags." I think that the volumes that we have are still quite insignificant compared with the rest of the market. WSJ: Your prices have risen much faster than inflation. To what extent are consumers beginning to resist these price increases?Mr. Dumas: I think we are very reasonable because there is no price marketing at all. It is just due to wage increases in France and the cost of the material. The price of good cashmere has increased 20%. The divide is not based on price, it's based on what you get for the product. That's why you see that the high-end luxury market did well. The lower end of the market is doing well also. Because for the two of them you get what you pay for. The middle—when the construction is closer to the lower end but you sell it at a price closer to high end—suffers the most in our industry.WSJ: You said that your prices are determined by costs. At the same time, you recently announced a record high operating margin. How do you justify that?Mr. Dumas: It's our operating margin. I won't say we've seen a great change in our gross margin. In each métier, we try to have them the same profitability, so we can have a huge spike in one and a decrease in the other and it won't have a major impact on the operating margin.WSJ: The crackdown on gifting in China has affected luxury-goods growth. How long do you think it will last?Mr. Dumas: When the big anticorruption wave ends, the attitude toward consumption will be easier. We are less affected because we're very specific about what kinds of credit cards we take. When you're buying for yourself, usually you pay with your own credit card and not a gift card that has been given by someone else.WSJ: How is Hermès affected by the slow economic growth in France?Mr. Dumas: Our sales in December were telling of the evolution. We had more customers than before, but the average basket was lower. We see that consumers were quite cautious about the economic perspective. The main issue in France globally is our unemployment, which is at an unsatisfactory level. Sometimes we are very good in productivity, but it doesn't help employment. WSJ: Your ancestors often ran Hermès until they were 80 years old. Is this a lifelong commitment for you?Mr. Dumas: As long as the family will be happy, and as long as I believe I can serve Hermès in a good way, I will be delighted. I think it's the best job in the world.
March 25, 2014
Hermes Store Employee Roster - Part 5 of 6
The Ingénue Gender: FemaleSexual Preference: whoever's paying Age: 20-25Hair: shinyTeeth: perfect and framed by Botox-enhanced lipsMotto: "Let me ask"Percentage in Hermes Captivity: 15-20% Likelihood of Birkin Purchase: what's a Birkin? Previous Job: kegger The Lowdown: this employee, although willing, is anything but ready-and-able. Apparently hired yesterday and has yet to go through any sort of formal training. Quick to get help from either the Incurable Romantic, Farmer, Nazi or Grandmother...just hope that it's not the Farmer you end up with!Approach: immediately ask if the Grandmother is working today
Hermes Store Employee Roster - Part 4 of 6
The Nazi Gender: eitherSexual Preference: overridden by career ambitionsAge: 25-60Hair: severeTeeth: gnashedMotto: "Refer to Employee Handbook "Percentage in Hermès Captivity: 30-45%Likelihood of Birkin Purchase: extremely high if you stick with "the formula" Previous Job: mall security guard/hall monitor The Lowdown: determined to be store manager. Cutthroat and totally by the book. Detests the Farmer but secretly long to have her position. Bulldozes over the Grandmother, ignores the Incurable Romantic. Career-driven pathological liar. Recognizable by the glint of desperation in his/her eyesApproach: tread cautiously...this is the employee that perpetuated the need for "the formula." Dollars count! Since they don't know diddly squat about Hermès history or merchandise from previous collections (remember they only care about $$$), use your knowledge to impress/disarm them and go for the croc Birkin. All bets are off - keep your cool, and they will crumble like the Germans at the Nuremberg trials.
March 24, 2014
Hermes Store Employee Roster - Part 6 of 6
The Godfather Gender: high-testosterone maleSexual Preference: yesAge: 25+Hair: slicked back, highly gelledTeeth: possibly one is gold or has a diamond in itMotto: "We can't really talk about this here"Percentage in Hermes Captivity: 5%Likelihood of Birkin Purchase: absolutely! Previous Job: "waste management," broker, maître d' The Lowdown: this employee has it all figured out and is essentially running his own business. There is no need to even bother with "the formula"; it's as simple as sending some money (aka payola) to this person's homeApproach: if offered a business card with a home or cell phone number written on the back, then you that he is on the take.
Hermes Store Employee Roster - Part 3 of 6
The Grandmother Gender: FemaleSexual Preference: not these daysAge: 60+Hair: frosted, gray or white, roller-setTeeth: yesMotto: "Aren't you adorable?"Percentage in Hermes Captivity: 15-20% (wish they would breed more)Likelihood of Birkin Purchase: very high Previous Job: nurturer, cookie maker, boo-boo kisser The Lowdown: this woman does not need the job. Her husband recently passed away so she likes getting out of the house and being paid to play with pretty things all day. Secretly hates the Farmer, although would never verbalize this feeling even when talking to herself. After several years still has yet to realize the Incurable Romantic is gay and keeps trying to set him up with her granddaughter and/or nieceApproach: approach without fear. Think of this woman as your grandmother for one hour. Really, it's that good!
March 22, 2014
Hermes Store Employee Roster - Part 2 of 6
The Farmer Gender: FemaleSexual Preference: what? Are you kidding?Age:50-70 (but looks and acts not a day over 90)Hair: gray with highlights of chicken-piss yellowTeeth: possiblyMotto: "You'll never see a Birkin in this lifetime"Percentage in Hermès Captivity: 5-10%Likelihood of Birkin Purchase: see Motto Previous Job: meatpacking plant foreman The Lowdown: this woman was born into a farming family from the hinterlands, raised on a diet of condensed milk and cattle by-products. She hates money and anyone who has it. The idea of a handbag that costs more than her car awakens both loathing and confusion in her soul. One can only wonder why she is inevitably store manager; perhaps some strange work release program of the fiftiesMale Approach: avoid at all costs due to potential for catching any number of agrarian-related illnesses. If interaction is inevitable, compliment her fake pearl studs. Brace yourself for rejection coupled with overwhelming waft of clinical halitosis.
Hermes Store Employee Roster - Part 1 of 6
The Incurable Romantic
Gender: MaleSexual Preference: queer as a three-dollar billAge: 21-60Hair: very Vidal SassoonTeeth: highway reflective strip whiteMotto: "Appearance is everything"Percentage in Hermès Captivity: 10-15%Likelihood of Birkin Purchase: almost 100%Previous Job: GucciThe Lowdown: this employee outwardly pretends to enjoy his job but is really just hoping to meet Mr. Right (a knight in a shining Hermès croc bomber jacket) and be saved from salesperson serfdom foreverMale Approach: flirtatious without blowing kisses, create false sense of dating potential. Flash croc agenda book (more subtle than flashing black Amex card) early in encounter to activate his innate gold-digging instincts. In case of extreme desperation (yours, not his) bait him with promise of after-work martinis at local Grand Hotel.Female approach: flirt a little too, but better off to compliment his acute sense of style sense, and talk about some hot guy in the store. Also insinuate you have a rich gay cousin you can set him up with.
Gender: MaleSexual Preference: queer as a three-dollar billAge: 21-60Hair: very Vidal SassoonTeeth: highway reflective strip whiteMotto: "Appearance is everything"Percentage in Hermès Captivity: 10-15%Likelihood of Birkin Purchase: almost 100%Previous Job: GucciThe Lowdown: this employee outwardly pretends to enjoy his job but is really just hoping to meet Mr. Right (a knight in a shining Hermès croc bomber jacket) and be saved from salesperson serfdom foreverMale Approach: flirtatious without blowing kisses, create false sense of dating potential. Flash croc agenda book (more subtle than flashing black Amex card) early in encounter to activate his innate gold-digging instincts. In case of extreme desperation (yours, not his) bait him with promise of after-work martinis at local Grand Hotel.Female approach: flirt a little too, but better off to compliment his acute sense of style sense, and talk about some hot guy in the store. Also insinuate you have a rich gay cousin you can set him up with. Johnny Weir’s Divorce Now Involves Ruined Birkin Bags
Johnny Weir’s Divorce Now Involves Ruined Birkin Bags, Restraining Orders And Doggy Drama
It’s not as if anyone expected the divorce between publicity-loving figure skater Johnny Weir and his soon-to-be ex-hubby Victor Voronov to be less than super-dramatic, but it seems to be growing more bitterly unpleasant by the hour. When we last checked in there was a lot of “he said/he said” going on with Voronov claiming to be shocked that Weir filed for divorce, despite plenty of evidence it was coming. And it’s almost stopped being fun to watch when sweet, innocent doggies are involved. Fortunately or not, we have the good folks at TMZ to thank for the up-to-the-minute reports on their splitsville shenanigans. It’s easy to snicker about Weir being upset when Voronov defaced his favorite Berkin bag. Can’t you just picture him shrieking in horror, “NOT THE BERKIN!!!” Actually, that’s not too far off. TMZ obtained a very passive-aggressive email he sent to Voronoz last September to try to make amends after some fracas, rumored to be infidelity on Weir’s part, occurred between them. Prepare yourself for some really moving poetry.
“If you decide to wreck things, please wreck cheaper things than Birkins,” Weir wrote. “The f*** you on the Birkin is kinda cool, though, you artist. I know you don’t care about Hill I’ll survive if you divorce me, but please leave my Birkin bags, Celine bags and Chanel bags alone.”
There’s speculation that Weir has suffered from financial woes as the email indicated he planned to part with the bags on eBay, while curiously pledging ”eternal” love from “the depths of my broken heart.” Who knew Johnny could be such a softie. If someone ruined our leather handbag (Birkins typically retail for between $10K-25K), we’d cut a bitch.
Or maybe just bite him. Which is exactly what Weir did. Take a look at the photo (left) TMZ obtained of the hideous, painful-looking wound on Voronov’s arm. That’s more serious than some S/M playtime gone wrong. The now-notorious biting incident took place back in January and resulted in a domestic abuse charge that was eventually dismissed when Voronov decided not to press charges after all.
But since then the situation intensified to the point where on March 5 Weir became so frustrated that he punched Voronov in the arm (hopefully it wasn’t the wounded bicep) and then began pelting him with jewelry and a wooden Russian doll (a Sochi souvenir?)!
Voronoz high-tailed it to court to seek a restraining order against his one-time beloved. Weir, perhaps mindful of the worth of those Berkins and knowing what Voronov was up to, marched into court ahead of his estranged husband to obtain an order that allowed him 30 minutes inside the apartment the two shared in New Jersey to collect a few personal belongings.
But Weir being Weir made a triple axel grand entrance accompanied by six policemen. You’re undoubtedly wondering which personal belongings Weir couldn’t live without. They include two TVs, several Hermes scarves, a few costumes and — OK, we’re going to stop being cynical here — he snatched Tema, a beautiful Japanese Chin the two men shared. TMZ writes that Voronoz sobbed uncontrollably as Weir split with their pooch.
This all begs two questions:
How can anyone squeeze so much drama into such a short period of time?
Also, is it too soon to begin dream casting the inevitable TV movie this mess will inspire? We see James Deen as Voronov and Christina Ricci as Weir.
http://www.queerty.com/johnny-weirs-d...
It’s not as if anyone expected the divorce between publicity-loving figure skater Johnny Weir and his soon-to-be ex-hubby Victor Voronov to be less than super-dramatic, but it seems to be growing more bitterly unpleasant by the hour. When we last checked in there was a lot of “he said/he said” going on with Voronov claiming to be shocked that Weir filed for divorce, despite plenty of evidence it was coming. And it’s almost stopped being fun to watch when sweet, innocent doggies are involved. Fortunately or not, we have the good folks at TMZ to thank for the up-to-the-minute reports on their splitsville shenanigans. It’s easy to snicker about Weir being upset when Voronov defaced his favorite Berkin bag. Can’t you just picture him shrieking in horror, “NOT THE BERKIN!!!” Actually, that’s not too far off. TMZ obtained a very passive-aggressive email he sent to Voronoz last September to try to make amends after some fracas, rumored to be infidelity on Weir’s part, occurred between them. Prepare yourself for some really moving poetry.“If you decide to wreck things, please wreck cheaper things than Birkins,” Weir wrote. “The f*** you on the Birkin is kinda cool, though, you artist. I know you don’t care about Hill I’ll survive if you divorce me, but please leave my Birkin bags, Celine bags and Chanel bags alone.”
There’s speculation that Weir has suffered from financial woes as the email indicated he planned to part with the bags on eBay, while curiously pledging ”eternal” love from “the depths of my broken heart.” Who knew Johnny could be such a softie. If someone ruined our leather handbag (Birkins typically retail for between $10K-25K), we’d cut a bitch.
Or maybe just bite him. Which is exactly what Weir did. Take a look at the photo (left) TMZ obtained of the hideous, painful-looking wound on Voronov’s arm. That’s more serious than some S/M playtime gone wrong. The now-notorious biting incident took place back in January and resulted in a domestic abuse charge that was eventually dismissed when Voronov decided not to press charges after all.
But since then the situation intensified to the point where on March 5 Weir became so frustrated that he punched Voronov in the arm (hopefully it wasn’t the wounded bicep) and then began pelting him with jewelry and a wooden Russian doll (a Sochi souvenir?)!
Voronoz high-tailed it to court to seek a restraining order against his one-time beloved. Weir, perhaps mindful of the worth of those Berkins and knowing what Voronov was up to, marched into court ahead of his estranged husband to obtain an order that allowed him 30 minutes inside the apartment the two shared in New Jersey to collect a few personal belongings.
But Weir being Weir made a triple axel grand entrance accompanied by six policemen. You’re undoubtedly wondering which personal belongings Weir couldn’t live without. They include two TVs, several Hermes scarves, a few costumes and — OK, we’re going to stop being cynical here — he snatched Tema, a beautiful Japanese Chin the two men shared. TMZ writes that Voronoz sobbed uncontrollably as Weir split with their pooch.
This all begs two questions:
How can anyone squeeze so much drama into such a short period of time?
Also, is it too soon to begin dream casting the inevitable TV movie this mess will inspire? We see James Deen as Voronov and Christina Ricci as Weir.
http://www.queerty.com/johnny-weirs-d...
