HERMES continues expansion amid news that its full year profit fell in 2009

Cuts in intventory by many of its distributors are to be blamed for a negative full year profit at French luxury brand HERMES, the company CEO announced this week. Hermes opened 14 stores in 2009 and has confirmed the opening of 12 more stores this year.

CPP‘s Oliver Petcu reckons that pressure from its shareholders as well as direct competition with Louis Vuitton and Gucci result in Hermes abandoning gradually its conservative expansion strategy worlwide. Hermes is already considering franchising in many emerging markets such as Eastern Europe, yet the huge cost of fittings and furnishings are deterring even experience luxury retailers from franchising the French brand. Currently, Hermes has the highest cost per square meter among all top international luxury brands which makes any business plan unfeasible for a franchisee, no matter the operating market.