Axel Dumas on Navigating Luxury in a VUCA World

PARIS — Hermès International is leaning on its long-standing strategy of product development and geographic diversification as it navigates a more fragmented global luxury market shaped by geopolitical tensions, shifting wealth dynamics and uneven demand across regions.

Speaking at the company’s annual shareholder meeting, executive chairman Axel Dumas struck a confident tone about the group’s performance despite macroeconomic volatility and currency headwinds, pointing to resilient demand and the structural strength of its regional-focused business model.

“I will be very blunt — I am very happy with our first quarter,” Dumas said, noting sales were up 6 percent at constant currency even as a strong euro weighed on reported results and geopolitical disruption dragged down March sales in the Middle East.

“We had a slight impact in the first quarter due to geopolitics, but we are not responsible for exchange rates or geopolitics,” he said. “It remains very difficult to predict crises.”

Dumas framed the current environment through what he described as a structurally more unstable global order. “Crises are inevitable and unpredictable,” he said, referencing what he called a “VUCA” — volatile, uncertain, complex, ambiguous — world, where chaos has become the new norm, rather than an exception.

Despite that backdrop, he argued Hermès is structurally positioned to absorb shocks due to its balance across regions and categories, as well as its focus on cultivating local clientele.

“The Hermès model — balanced across métiers, geographies, with a strong focus on quality — seems to me a good strategy in such an unstable world,” he said. “So I remain optimistic about the fundamentals of Hermès and our ability to evolve in an anxious world.”

A key shift, Dumas said, lies in how luxury demand is now driven less by macroeconomic growth and more by changes in personal wealth linked to financial and property markets.

“The biggest transformation I have seen in recent years in the behavior of our clients .… Until the mid-2010s, the best indicator was GDP growth,” he said. “From the mid-2010s, the proxy that gives the strongest signal is real estate valuation and stock markets.

“People buy much more according to the evolution of their wealth than according to the evolution of national income,” he said.

That shift has been particularly visible in China, where weakness in real estate has weighed on consumption among parts of the population, he added. “The problems we can see today in China, for example, come first from a decline in real estate, which leads part of the population to spend less and save more,” Dumas said.

At the same time, he said geopolitical fragmentation is reshaping customer demand, with local consumption and “multilocal” purchasing patterns becoming more important.

“Because we are a small-volume brand, because we are exclusive, because this quality is not found elsewhere — we continue to see very strong interest across all geographic zones,” Dumas said.

He pointed in particular to the Middle East, where the current conflict has disrupted tourism flows but not eliminated demand.

“Where we see a risk area is the Middle East,” Dumas said. “We were growing strongly there before the war. If the high-spending, traveling clientele is affected, we too can be affected, though more moderately.”

He contrasted this with past crises, noting that during the pandemic, Hermès temporarily closed most of its stores, while the current disruption has been more uneven. And like the post-pandemic “revenge spending,” Dumas believes that pattern will hold.

“After a crisis passes, we often see a rebound in consumption — a desire to enjoy life again,” he said. “That is human nature.”

On pricing power and tariffs, Dumas downplayed their relative impact compared to structural cost pressures in Europe.

“Everyone talks to me about tariffs, but tariffs cost us much less than producing in France with the ‘exceptional contribution,’” he said, taking the first of a few swipes at the French government’s “temporary” tax applied to large corporate profits, which has been reintroduced several years in a row.

Dumas added that Hermès has increased prices in the U.S. to offset the cost of tariffs, which has not dented sales in the country. “Tariffs have been a small obstacle, but not the biggest obstacle in Hermès’ path,” he said.

A defining feature of Hermès’ model, he added, is its rejection of conventional marketing-heavy luxury strategies.

“I would say our first marketing tool is in the price of the product,” Dumas said. “We hope the product speaks for itself, and we therefore have lower marketing costs.”

He contrasted this with competitors that rely more heavily on advertising to support higher production volumes. “Some put the money elsewhere and then have to spend more on marketing to explain that [the product] is great.”

Dumas was also questioned on the company’s policy on counterfeits, “dupes” and the second-hand market. He referred to both reputational risks and cultural complexity, but downplayed their long-term impact on the brand.

Geographically, Hermès continues to expand selectively, prioritizing markets where local infrastructure and demand justify direct presence.

Regarding Saudi Arabia, where other luxury peers have been expanding rapidly, Dumas said they are searching for the right move now that Saudi Arabia’s foreign investment and commercial codes under its Vision 2030 plan have made it easier for international groups to operate more directly in the kingdom than under the previous, more licensing- and partnership-heavy rules.

“Now we can operate directly, so it is part of our thinking. We have a very strong Saudi clientele. Some clients travel to Europe or other stores in the region. There is strong demand there,” he said. “For now, we are negotiating. We are working on it, but we need to find the right partner locally.”

On India, Dumas described a market full of potential but structural constraints. “India is a very interesting country. We have a good Indian clientele, but they do not necessarily buy in India,” he said, citing high import duties, strong domestic artisanal competition and local style. “It is a formidable country where we will develop, at a pace that remains somewhat mysterious.”

Dumas struck a similar tone on Africa, where projects are under consideration, but indicated that any opening is still some way off.

“We have not yet found the right locations in terms of retail infrastructure and sufficient middle-class development,” he said. “We do have a strong African clientele who travels to our stores, but we usually establish ourselves in a country only when there is a sufficiently large local customer base.”

The group is still on track to launch its couture collection in 2027, Dumas said, with ateliers already working on it under women’s creative director Nadège Vanhée-Cybulski. But he emphasized yet again that it will be launched “when we are ready.”

On the beauty front, Dumas said the expansion into that category has been a “half success, half failure” story so far.

Dumas said Hermès beauty is performing well in its own stores and directly controlled channels, where the brand can manage the full immersive retail experience and maintain tighter control over storytelling and customer engagement, but namechecked the bankruptcy of Saks Global in the U.S. as an example of the overall fragility in department store-led distribution, as well as consolidation, citing the pending possible merger of the Estée Lauder Cos. and Puig.

Seemingly referencing Kering’s sale of its beauty arm to L’Oréal, he added that Hermès will continue to develop its beauty business “independently.”

He added that men’s fragrances have performed well, with more softness in the women’s categories. To that end, the company is still planning to launch hydration care and additional makeup products in the women’s categories, which have been harder to crack.

The meeting opened with a trio of tap dancers, setting a buoyant tone for a morning that also featured a short film on silk scarf production in Japan.

Several shareholders grumbled about the inefficient invitation and entry process, which held up the start of the meeting by a half hour and left several attendees without voting machines. Supervisory board president Eric de Seynes said that RSVPs to the in-person event were up 35 percent this year, with many affirmative replies coming within the final 24 hours, leading to the backup.

The voting yielded no surprises, as all motions were passed, including the appointment of Lucia Sinapi-Thomas to the board, where she will take up the position of chair of the audit committee for a three-year term.