Hong Kong stocks have not been as surprising as they have been recently. The Hang Seng Technology Index rose 6.5% on Friday, and also led to the author’s “He Bo and Hai Ruo” position performance in “Xinbao Finance Monthly” continued to be good, including September 2023 SMIC swept in at 21.1 yuan on the 4th (00981) 180,000 shares, closing at a record high of 54.2 yuan, with a cumulative soaring by 1.57 times, and has now become the sixth largest stock in position.

Chinese people like to buy luxury goods after making money in the stock market. Among the famous brands, Hermès can be said to be the only one: its performance is not affected by weak consumer confidence in Europe and even the world, and it can always continue to improve. Its profit growth is both an investment. The world beauty talk is also mysterious. What is the reason?

The Data Speaks for Itself

The data is not lying. Hermes’ annual compound revenue growth rate (CAGR) from 2018 to 2024 was 1.5%, significantly higher than LVMH (12%), Kering (Gucci), and Chanel (10%), jewelry and high-end watch brand Richemont (6.3%). Even under the impact of the epidemic in 2020, Hermes still grew by 7% against the trend, while LVMH fashion and leather goods division fell by 3% and Kering fell by 16% during the same period. In 2023, Hermes’ revenue exceeded 13.4 billion euros, an increase of 21% year-on-year, with a growth rate of more than twice that of peers; its operating profit margin was 42.1%, ranking first in the industry for a longer time, far exceeding 20% ​​to 30% of LVMH, Chanel and Kering. No waiting.

The Essence of Luxury in a Changing World

The value investment method focuses on seeing through the essence of things, and this time I will dismantle it for you. To understand the uniqueness of Hermes, we must first understand the current positioning of the luxury world. The cost of living is increasing day by day, AI replaces personnel, and the haze of positions is lingering. People become more and more picky when choosing luxury goods. It is best to buy luxury goods to show off or make themselves feel good for a while. After being satisfied, they can still make money. These luxury brands include Hermès, Patek Philippe, Rolls-Royce, Chanel, etc. (Chanel’s extreme luxury is in the Chanel Haute Couture branch, so the brand does not directly compete with Hermès).

Integrated Data to Confirm and Complement Each Other

In fact, Hermes’ Birkin, Constance, and Kelly bags are known for “preserving value” (in this difficult generation, don’t you see the boss of Rolex also came out to clarify that he never agreed to the value of Rolex watches?), Hermes built ” Moat”, the core leather goods department contributed more than 50% of its revenue, and the distribution system successfully transformed customers into all categories of consumers. The average waiting list of customers is 18 to 24 months. The scarcity further pushes up the premium of the second-hand market, forming a consumer psychology that the more expensive it is, the more you want to buy it (according to Xiaohongshu’s strategy, customers need to fly to Tokyo or Paris headquarters in order to enjoy it. First establish a good relationship with the business representative, meet two or three times and buy non-popular products before you can be qualified to wait! ).

The Role of ERP in Hermes’ Success

With a 15 billion euro business a year, Hermes needs to be consistent in products, marketing, logistics and after-sales services, and needs to have advanced systems. The top priority is enterprise resource planning (ERP). ERP integrates all company data to verify and complement each other. ERP is divided into multiple modules. For example, inventory modules use AI-driven insights to predict trends and conduct prescriptive analysis (prescriptive analysis, which is the highest level of analysis), guiding when and where to design and produce what products; customers Customer Relationship Management (CRM) module integrates social media and customer profiles to improve marketing activities and products to launch customer sentiment analysis (where does it come from the magic of waiting for distinguished customers for two years without getting angry?); Human Resources ( Human Capital Management, HCM module updates sales, factory technicians, and market planners’ performance and job satisfaction in real time, and uses financial data to reward outstanding employees to attract talents and consolidate corporate culture and cohesion; Finance and Monitoring (FI /CO) module shares data with Business Intelligence (BI), which leverages technology to collect and analyze data, making institutional strategies and daily decision-making processes decisively and effectively.

At this point, it is not difficult for us to understand that behind Hermes’ strong sales, there must be an ERP system that is unique in the world, cannot be copied by competitors, and is equipped with two swords, HCM and CRM.

The Secret Behind Hermes’ ERP System

According to the authoritative Paranoma Consulting information of ERP consulting, in the ERP world, there are three “ceilings” categories: SAP, Oracle, and Infor, among which Infor is divided into CloudSuite Enterprise (M3) for retail and CloudSuite Industrial (LN); The grades include Microsoft Dynamic 365, Sage, etc. When everyone knew that LVMH used SAP, Tiffany had been using Oracle NetSuite before being acquired by LVMH, and Salvatore Ferragamo was a loyal fan of Infor CloudSuite, people actually knew nothing about Hermes’ ERP application!

In fact, this is not entirely because Hermes is secretly irrelevant, and there is more reason to believe that their ERP design is as delicate as weaving Birkin handbags with a market price of up to $450,000. Based on many sources, I tend to believe that Hermes uses SAP S4/Hana Retail (known for real-time, API ductility, and local cloud) as the backbone system (backbone system), and cooperates with third-party accompanying modules (3P bolt-on module). , for example, Oracle Cloud HCM) plays the most effective role in the group’s information.

Hermes’ Future Under Executive Chairman Axel Dumas

It can be seen that the honorable fund manager who “ticks his eyebrows” understands the absurdity of Dongshi’s imitation and the rare real moat in the world (even the Google searches praised by the late outstanding investor and philanthropist Charlie Munger will be one day Grok-3 , DeepSeek and other AI comparison! ), chasing Hermes with huge funds, giving it a valuation of 63 times the historical price-earnings ratio, unprecedented.

Hermes’ recent performance and subsequent developments under Executive Chairman Axel Dumas will be discussed next week.

Conclusion

Hermès stands out as a beacon of stability and growth in the luxury goods market. Its unique ERP system, combined with a strong brand reputation and strategic business practices, positions it as a leader in the industry. As the luxury market continues to evolve, Hermes’ commitment to innovation and customer satisfaction ensures its continued success.