Unhurt by downturn, high-end retailer Hermes sees growth

By Buck Wargo

Thursday, Jan. 7, 2010 | 2:31 p.m.

The country is emerging from its worst economic downturn since the 1930s and Las Vegas remains mired in a recession, but a high-end French retailer hasn’t felt that impact along the Strip and is even eyeing expansion plans for the market.

A year after opening its second store in Las Vegas at Encore, Hermes is opening a store Jan. 15 at Crystals in CityCenter. It will replace the original Las Vegas’ Hermes that opened in 1998 at the Bellagio. That store will close Monday because of its proximity to Crystals.

Hermes’ model is one of limited distribution for its high-end fashion brand, which includes hand-crafted leather goods, silk scarves, ties, perfumes, men and women’s ready-to-wear collections, watches, jewelry and shoes. It has 23 stores nationwide after opening three in 2009, including the one in Las Vegas.

Hermes USA CEO Robert Chavez said today the same-store sales in 2009 rose in the mid-single digits and that opening a second store in Las Vegas hasn’t cannibalized the first. That success is expected to carry on with the opening at Crystals, and there has been no second-guessing about proceeding, he said.

“Our business almost doubled in the city last year in the year of one of the worst recessions there has been in a long time,” Chavez said. “It is pretty incredible to see that type of result. We expected something much more conservative. If anything, having the second store raised the level of awareness. That confirmed to us that there can still be a tremendous amount of business that can be had here in Las Vegas.”

Bellagio sales have risen 8 percent to 15 percent a year or even higher during the good years, Chavez said, he said. Sales slowed a little in early 2009 when foreign tourist traffic dipped but it picked back up in the fall when travel rebounded, he said.

“What CityCenter will do for the local economy is bring a lot of people back to Las Vegas,” Chavez said. “From a (public relations) standpoint, this project has gotten a tremendous amount of attention, and people are really interested in seeing it. And there will be a lot of international people because it is such a dynamic project.”

About 85 percent of Hermes’ business at the Bellagio has been tourists compared with about 75 percent at the Encore, Chavez said. He estimates about 45 percent of its customers are from abroad with the bulk of them Asian, but there is also a growing number from South America and Mexico.

Even people who have access to a Hermes in Chicago, New York or Los Angeles will shop at the Las Vegas stores because no two stores have the same merchandise — the directors go to Paris twice a year to buy for their stores.

Although retailers in Las Vegas and across the country have been hurt by the slowdown in the economy, the ultrahigh-end fashion house such as Hermes seems to have been immune.

“You see what has happened around the U.S., and it is pretty remarkable considering the challenges we faced during the year,” Chavez said. “The segment we are in, maybe they were not as badly impacted or they were impacted but they were able to recover more quickly than most.”

Chavez admits American consumers have pulled back on their spending after they realized they were buying more than they needed but that thought process has benefited Hermes. When people buy something now, they want it to be meaningful and last for a long time, he said.

“That is where that limited distribution and quality of craftsmanship we represent (benefits us),” Chavez said. “Instead of spending $200 and buying three things (at a store), they may say ‘I want one really nice $400 scarf at Hermes because I know it will be classic and last me season after season. I can give it to my daughter and she can give it to her daughter. I think there is a great appreciation for that type of thing.’

“That is something we felt even more during the holiday season.”

Hermes is known for its bags made famous by actresses such as Grace Kelly and Jane Birkin. They start at prices of $5,000 and $8,000, respectively, and in the case of the Birkin bag can surpass $200,000. The handmade bags take about 24 hours to make, which limits their production and can create a wait for them.

Chavez said the Bellagio could have remained open, but Hermes wanted to stick to its model of limited distribution.

“In Las Vegas, it is very tempting because you see all of these wonderful projects that are around us,” Chavez said.

Part of Chavez’ visit to Las Vegas this week was to seek out future opportunities for Hermes in two to three years time. That could include opening a third location or maybe a new concept, he said.

Hermes is unveiling an unusual concept next month in New York with the opening a men’s store across from its flagship on Madison Avenue . It has also done a seasonal store in East Hampton, and that concept could work for Las Vegas as well, Chavez said.

“We think this it the place to try it,” Chavez said of new concepts. “The reason is you get visitors from all over the world. It is a good barometer to tell us things.”