Adding A New Normandy Facility Boosts Hermes' Kelly Bag Production

With the aim of meeting the rising demand for its Kelly and Constance handbags, Hermes has inaugurated a new factory in Normandy that produces leather goods.

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There are 140 leather workers at the factory in Louviers, and the company hopes to double that number within four years to produce saddles, bags, and small leather items. One Kelly bag, weighing 25 centimeters, costs €7,700 ($8,400) in Louviers, and will eventually come in another style referred to as Constance mini, which is estimated to be available in the near future. One Kelly bag is made from scratch by a single leather worker and takes between 14 and 20 hours to complete.

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The luxury goods company's production increases are limited by the need for an adequate level of savoir-faire in order to handle the increase in sales. Executive Chairman Axel Dumas told reporters Friday that Hermes aims to increase its leather goods volumes by about 7% annually, adding approximately one leather plant annually.

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Dumas said that training takes time, which is why we take our best artisans and they become trainers, so they're no longer involved in production. This is why they open one shop yearly, "because we don't want to disrupt our existing business while still growing at the same time."

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The Hermes company has 21 leather manufacturing factories located all over France, including one in Louviers, a facility that is 6,200 square meters (67,000 square feet) in size. Lina Ghotmeh was tasked with designing the Louviers facility. The company also has a fragrance plant in Normandy as well as another leather manufacturing facility. About a quarter of the company's almost 20,000 employees are leather craftsmen.

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Investors rush to buy luxury names they believe are resilient to inflation pressure on consumers' budgets as they see Hermes passing the 200 billion euro valuation milestone this week, as they rush to buy luxury brands. The market volatility has not yet adversely affected luxury stocks, as shares of Hermes have so far gained 30% so far this year.

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As far as pricing power is concerned, many analysts consider Hermes to be in a class by itself when it comes to its handbags. Demand typically exceeds the capacity of the company's production and many bags also have a higher resell value than their original prices.

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The brand manufactures all of its bags in its own plant in the company's home market, however, the label manufactures its watches in Switzerland, and the brand also manufactures some of its shoes in Italy as part of its shoe manufacturing activities.

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