Hermès feels the heat

The Luxe Chronicles has an interesting post on how the weakening dollar is affecting the luxury industry. In fact, no less than Hermès president Patrick Thomas has voiced his concerns about the repercussions for the sector.

Writes Helene:

It's estimated that the Euro could potentially reach $1.50 USD in 2008. This represents a double whammy for European luxury houses. French and Italian luxury houses are particularly vulnerable as both countries have stringent regulations which require substantial proportions of a product to be manufactured and assembled on their territory to qualify for the all-important "Made in France" or "Made in Italy" label that warrants the hefty pricetags. Many such as Hermès produce their goods entirely within their own borders at significantly increased costs as compared to competitors who often subcontract production in whole or in part overseas. To compound the problem, the weakness of the US Dollar and the Japanese Yen vis-a-vis the Euro translates into reduced spending power for American and Japanese clients.

The measure of the pressure facing European luxury houses can be surmised by a statement made recently by the usually discreet House of Hermès. Indeed, Hermès' President Patrick Thomas called upon the European Central Bank to adopt measures to curb the Euro's climb. In fact, the term being uttered from the lips of many French CEOs is 'delocalisation': A euphemism for moving production to cheaper overseas venues. In other words, "outsourcing".

Mr Thomas was quick to rule out this option where Hermès is concerned. The mere fact that Hermès has joined its voice to the chorus of French industrial leaders on the currency issue, however, is telling.