In general, luxury brands are struggling these days. There have been significant changes in both consumer preferences and spending habits over the last few years, and due to a decline of tourism throughout Europe and the U.S., the luxury goods market has shown a lot less growth. Although analysts have warned that this phenomenon may be “the new normal,” some brands are trying to save their hides — with hides.
Hermès International is one of those brands. While the exclusive French house has always boasted long waiting lists for their hard-to-obtain Birkin bags, Hermès made a daring move this year by increasing its leather handbag production.
Despite the fact that experts warned this move could put the entire brand in danger, it seems to be working. Chief Executive for Hermès Axel Dumas has said that the boost in production has driven a notable rise in sales. In fact, its leather goods category has proven to grow the fastest, as sales for these items were up by 16% during the first nine months of 2015.
Leather is considered by many to be a timeless classic, but it’s had a bit of a resurgence recently. The leather industry itself is thriving — it generates more than $53 billion each year — so it makes sense that luxury brands are embracing the use of this material in order to raise their floundering sales.
And while leather has long since been a hallmark for Hermès, the brand has good reason to shift its focus to its leather offerings. The sales of their silk and textile pieces fell by 6.8% in the last year, while sales of their ready-to-wear items declined by 1.8%.
However, largely due to the increase in leather goods production, Hermès actually posted a 7% sales growth during the last nine months. Their total sales rose to $4.11 billion and accelerated particularly during the third quarter of the year.
After the company posted these results, the share price for Hermès opened up at 2.4%. While the brand expects that its sales in other categories will increase during the Christmas season, they may need to keep the spotlight on their leather offerings for the foreseeable future.