The Market Value Of Hermes Is Overtaken By Gucci Parent Company. How To Maintain Freshness Is A Difficult Problem.

The market value of the three luxury oligarchs has been rolling over the past fourth years, including LVMH, Kai Yun group's annual and Hermes's quarterly results, but subtle changes have taken place.

Gucci shares rose by 3.21% to 495.5 euros on Friday's close end, thanks to the positive trend of the core brand's Gucci performance. The cumulative growth of 23% this year and the market capitalization of about 62 billion 300 million euros has already exceeded 58 billion 640 million euros of the Hermes group (RMS.PA). 2 years ago, Hermes's market value was almost 1.5 times that of the open group.

It is noteworthy that Louis Vuitton's parent company LVMH (MC.PA) shares hit a record high last Friday, with an increase of 1.52% to 306.6 euros and a market value of more than 154 billion 100 million euros. Compared with the low performance period in early 2016, its market value has doubled, which is now nearly 3 times that of Hermes, and the difference between the two years ago is only 1.7 times.

Benefiting from boldness and youth, Gucci first overtook Hermes in 2017 and expanded its income to 2 billion euros in 2018.

In order to achieve the target of 10 billion euros in sales at the beginning of last year, Gucci business brain and CEO Marco Bizzarri are leading the Gucci team to launch a new strategic plan, and it is expected that sales will double the market growth rate in the next few years.

The report predicts that by 2025, Chinese consumers will contribute nearly 50% of the global luxury sector sales.

Some analysts pointed out that in the rapidly changing luxury industry, with the increasing influence of social media, consumers' preferences are hard to understand. Brand needs to attract consumers' attention by constantly introducing unique and innovative designs or gimmick fashion shows.

Federica Levato, partner of Bain company, said luxury brands should be responsible for themselves. In the increasingly smart days of consumers, forward-looking brands will win more potential people.

Gucci is a new industry pulse, breaking the curse of the industry.

According to the fourth quarter and annual performance report released by Kai Yun group, the group's sales in 2018 increased by 29.4% to 13 billion 665 million euros compared with the same period last year, operating profit rose 46.6% to 3 billion 944 million euros compared with the same period last year, and the revenue of the luxury sector grew for 8 consecutive quarters, more than 20%. The growth rate has obviously exceeded that of its fashion leather Department and its LVMH.

Among them, Gucci, which has been leading for 12 consecutive quarters, surged 36.9% to 8 billion 285 million euros in the same period last year. For the first time in history, it entered 8 billion euro clubs.

Chinese consumers have contributed. According to Gucci's report, the retail sales in Asia Pacific market, including China, have increased by 45%.

Last year, 62% of Gucci consumers were the millennial generation, and 35% were Chinese consumers.

Gucci's aggressiveness inspired LVMH's fighting spirit.

Although Kai Yun group claims to "destroy" its old rival Louis Vuitton, LVMH is laying out a series of "defense mechanisms" without leaving any opportunity to continue to achieve high growth under high base numbers.

According to the 2018 fourth quarter and annual performance report released by LVMH, the group's revenue continued to grow in double-digit growth in the fourth quarter, rising 10% to 13 billion 697 million euros compared with the same period last year, and the organic growth rate was 9%. The annual total revenue also increased by 10% to 46 billion 800 million euros, operating profit rose by 21% to 10 billion euros, and the net profit rose to 18% euro.

In the fourth quarter of last year, the fashion leather Department continued to grow by up to 17% under the impetus of the core brand Louis Vuitton and Dior, contributing 5 billion 400 million euros to the group. It has been double digit growth for 9 consecutive quarters. In 2018, the sales volume of the Department rose 15% to 18 billion 455 million euros, while operating profit rose 21% to approximate 6 billion euros.

(extended reading: operating profit breaking 10 billion euro!

LVMH 2018 performance record of innovation)

What investors are wary of is that Hermes, whose market capitalization is already at the bottom, is still struggling to get rid of the serious situation of relying on handbags, but rare animal fur has become the sword of Damour and Chris on the head of Hermes.

According to fashion headline data, Hermes's platinum bag made from rare animal leather accounts for about 15% of the group's handbag sales.

In particular, in the second quarter of last year, group sales continued to maintain a high single digit growth, but the core handbags and harness sector slowed sharply. According to the fashion business express data, the sector recorded a 3.6% growth rate in the second quarter, a sharp decrease from 10.5% in the same period in 2017, and the lowest growth rate in addition to the watch business.

Hermes has not released its performance figures for the past year, but Axel Dumas, chief executive of Hermes, said he was satisfied with the performance of Hermes under the background of uncertain global retail environment and revealed that the brand revenue last year was about 6 billion euros, with a profit margin of about 34%.

Analysts say that in the five luxury brand camps including Louis Vuitton, Chanel, Hermes, Prada and Gucci, Gucci is boldly breaking the fashion rules. Hermes is hesitant about how to balance the scarcity of brands and the younger ones. The former is the moat of many years. It is precisely because of the luxury craft and scarcity that Hermes can occupy the important position in the luxury industry for a long time. But the latter is the trend that the industry is almost irresistible nowadays. Whether Prada, Dior or Louis Vuitton are beginning to be bold and young, but since last year, Hermes has all been running away from the Department of fashion and leather products. Yes.

Compared with Chanel, Louis Vuitton and Gucci luxury goods group, Hermes has a high degree of dependence on handbags and accounts for more than 50% of revenue. Any change of the latter will have an important impact on the brand.

With sustainable fashion becoming a trend, it will affect consumers' willingness to take out their wallets.

Chanel also announced last year that it would no longer use rare leather. It is expected that the luxury brand anti fur camp will continue to expand, and this trend will lead Hermes into isolation.

Some analysts say that any luxury brand is old in terms of brand history.

Just like middle-aged people, luxury brands have great anxiety for rapid change, backwardness or even being eliminated. There are two kinds of dangerous reactions to this anxiety: one is to stick to their positions, the other is to be bold and young, and more accurately grasp the trend of the times.

In the long run, luxury goods are being redefined.

Everyone wants to rely on Chinese consumers, but the only thing they can rely on is the brand itself.

Axel Dumas is also frank about the rise of risky social media and China's online market. Hermes needs to jump out of the traditional shackles to narrow the digital divide between competitors, because the millennials have become a key group in the direction of the development of the luxury market in the next ten years.