Hermes hires more workers
HERMES International is hiring workers and investing in French production to meet surging demand for handbags in Asia, boosting the economy as presidential elections highlight the country’s struggle to create jobs.
The Paris-based luxury-goods company is expanding its network of domestic workshops that make bags like the Kelly and Birkin, it said yesterday in reporting quarterly sales that beat estimates.
For Hermes, a “Made in France” label is an intrinsic part of the appeal of its handbags, which are coveted in Asia and elsewhere as an emblem of French chic.
“This represents significant brand equity for them,” said Leopold Authie, analyst at Oddo & Cie. “France has know-how for certain luxury products that you can’t find elsewhere, just as Italy has shoes and Switzerland has watches.”
The move to boost employment comes as presidential runoff contenders Emmanuel Macron and Marine Le Pen debate how to revive employment in a country where the jobless rate remains stuck at 10 percent despite a nascent economic recovery.
In the run-up to the May 7 vote, the two finalists this week squared off at a Whirlpool factory near the northern city of Amiens, where workers are protesting plans to move production to Poland.
Hermes, which makes about 85 of its products in France, plans to increase leather-goods output by 8 percent and to hire 250 workers in the country this year.
Investing
The company said it was investing in a third workshop in the Franche-Comte region, bringing the total number of domestic leather production sites to 15.
Making handbags in France is not without challenges, including the country’s 35-hour work week and labour laws that add costly social charges to the payroll and make it difficult to dismiss workers.
“The average bag takes them 16 hours to make,” chief executive Axel Dumas said. “We work 35 hours in France, so you can imagine.”
It is hard to bring on more than the 250 craftsmen and women the company plans to add this year because training them requires taking another worker off the line to teach them, Dumas said. Overall, Hermes had 7 881 domestic employees in 2016, or about 60 percent of its total.
Rival LVMH experienced work stoppages at some Louis Vuitton production sites this month after unions called on workers to protest salary increases they deemed insufficient. Such disruptions have been rare for the luggage maker, which added 370 workers in its French plants in 2016. Hermes last year achieved productivity increases of 15 percent, and it is targeting 8 percent for 2017. The company needs those kind of gains to meet demand for its handbags, silk ties and other goods in Asia and elsewhere.
Sales of leather goods and saddlery, which account for roughly half of Hermes’s revenue, jumped 15 percent in the first quarter. Revenue climbed 11 percent on a constant-currency basis, beating the 8.8 percent median estimate of eight analysts in a survey. Asia, minus Japan, led the way with a 16 percent gain.
France’s advantages as a production site were not matched in the company’s sales performance: revenue there climbed 4 percent, less than half the rate analysts had estimated.
Overall, the results represent a marked uptick from a year ago, when flagging consumption in China and a terrorismrelated downturn in European tourism saw the company report its slowest quarter in seven years. The luxury-goods industry has bounced back more broadly, with first-quarter results from LVMH and Kering surging past analyst estimates.
Berenberg analyst Zuzanna Pusz said the gains at Hermes underpin the industry’s recovery. – Bloomberg VIENNA prosecutors are investigating Airbus chief executive Thomas Enders for suspected fraud in connection with a $2 billion (R26.33bn) Eurofighter jet order by Austria more than a decade ago, the prosecutors’ office said.
Correspondence listed Enders as one of those accused in the investigation, and a spokesperson for the Vienna prosecutors’ office said that information was correct.
“I can confirm that,” the spokesperson, Nina Bussek, said.
Airbus spokesperson Martin Aguera declined to comment.
In February, Vienna prosecutors opened a criminal investigation after the defence ministry said it believed Airbus and Eurofighter misled decision-makers about the purchase price, deliverability and equipment of the 2003 warplane order.
A person close to Airbus, asking not to be named, said Enders had not been notified of any proceedings against him and had not so far been considered a witness in the investigation.
Enders and Airbus, which was called European Aeronautic, Defence and Space Company (EADS) at the time the fighter jet order was agreed, have repeatedly denied any wrongdoing. Enders was head of EADS’s defence division when the contract was signed. He took responsibility for combat aircraft a few months later.
The Eurofighter consortium, which comprises BAE Systems, Italy’s Leonardo and Airbus, has also denied any wrongdoing.
Airbus shares shed gains after it was reported that Enders was being investigated, and fell as much as 1.1 percent. They were up 0.3 percent at €74.32 at 2.40pm yesterday.
Austrian and German prosecutors have separately been investigating for years whether officials received bribes aimed at ensuring they chose Eurofighter jets over rival offers from Saab and Lockheed Martin.
Allegations surfaced almost immediately after the purchase was agreed that money was pocketed by politicians, public servants and others via brokers for so-called offset deals accompanying the transaction.
These deals, common in large arms purchases, are designed to provide work for local businesses in countries placing orders.
Austria’s defence ministry has alleged Airbus and the Eurofighter consortium illegally charged nearly 10 percent of the purchase price of €1.96 billion for these side deals. – Reuters