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Patrick Thomas, CEO of Hermès SA. (Anthony Jenkins for The Globe and Mail)
Patrick Thomas, CEO of Hermès SA. (Anthony Jenkins for The Globe and Mail)

The Lunch

Hermès’ Patrick Thomas: A high-fashion balancing act Add to ...

When it comes to business, Patrick Thomas is a family man.

The chief executive of luxury purveyor Hermès SA has held top positions at a series of family dynasties. In each case, he’s been the outsider brought in by the clan to help transform their business, run it better and give talented design officials room to breathe.

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He sees himself as an entrepreneur who has a hand in shaping their vision. He leaves the critical design work – such as developing the trademark Hermès silk scarves priced at up to $1,370 a pop – to others.

“If you ask me to design the Hermès scarves, Hermès will go bankrupt,” he says with a smile.

Far from being bankrupt, Hermès of Paris, known for its $8,000 to $50,000 Birkin and Kelly handbags, has enjoyed healthy financial gains despite the uncertainty surrounding the global economy and China, which is still a bastion of big spenders.

As the first non-family member to head Hermès, Mr. Thomas’s success has depended on ultra-wealthy customers who still are ready to drop $170,000 for a diamond-studded leather bag.

By next year, the 66-year-old Mr. Thomas will hand the reins back to a family member – Axel Dumas, 43, part of the sixth generation – leaving at least one key file open. Hermès has been locked in a legal spat with rival luxury powerhouse LVMH Moët Hennessy Louis Vuitton SA over its having bought a minority stake in Hermès in late 2010.

LVMH’s tactic of amassing a large interest in Hermès through complex cash-settled equity swaps, a strategy used by hedge funds to launch hostile takeovers of publicly traded companies without disclosure, angered the usually mild-mannered Mr. Thomas, who led the battle to keep LVMH at bay.

The wrangling seems out of character for Mr. Thomas, who speaks English with a French accent. He displays impeccable politeness and evenness during our almost two-hour late lunch at the appropriately posh Canoe restaurant, on the 54th floor of a downtown Toronto office tower with an unfettered view of Lake Ontario. For someone who deals with the most opulent of merchandise, he comes across as down to earth, calling some of the bejewelled six-figure handbag prices “crazy.”

“I’m not a man of luxury,” he says simply, even as he’s dressed head-to-toe in understated Hermès garb, including the loafers. “I like quality.”

He doesn’t like a fight, but he can fight with the best of them, he says as he dips his spoon in the squash soup, garnished with a dab of sheep’s milk yogurt.

“I’m not a man of conflict,” he asserts. “I’m ready to have a conflict if necessary – I showed it against LVMH, but I’m not creating conflict. On the contrary, I’m trying to create consensus as much as I can. But I can fight from time to time, if necessary.”

That includes ruffling family feathers at Hermès. At one point, he let go two of its members – there are five left in the company now – although he won’t provide details and doesn’t want the matter to be reported. “I said to them, ‘You are not performing, you have to go’… I had to make some difficult family decisions.”

As the outsider, Mr. Thomas aimed to give Hermès more structure and put it on a more daring path. He’s a big believer in family companies that have spawned iconic names such as Saab, Mercedes, Vuitton and Hermès. He feels like a member of the Hermès family, admires it for thinking long term rather than just quarter to quarter, and for taking care of its employees, he says. He hand-picked his successor and, while the family gave him leeway to choose another outsider, he opted for Mr. Dumas, who is “brilliant,” Mr. Thomas says. “He was born in the suit – we say that in French.”

His entrepreneurial and family-business bent is in his blood. He was born in the Burgundy region of France to a family of winemakers; his father went on to develop a fruit juice company. That firm, Pampryl, was acquired by Pernod Ricard, the French spirits concern and one of the companies that Mr. Thomas worked for after he graduated from the prestigious École Supérieure de Commerce de Paris.

His first job was with U.S.-based International Telephone & Telegraph in Paris in 1971, where he spent two years and learned a life lesson. “I got so bored that I said, ‘I can’t,’ because it was working in administration – a boring administration – and I didn’t want to work in a boring admin. I wanted to be an entrepreneur in a company where I could develop some talents.”

That’s when he joined family-owned Pernod Ricard, where he stayed for about 16 years before moving on to Hermès in 1989, becoming group managing director while its chairman, the charismatic Jean-Louis Dumas – the uncle of Axel – was in control of product development and artistic style. Design has never been part of Mr. Thomas’s responsibilities.

“I don’t have the talent,” he explains. “You don’t say to [fashion designer] Mr. [Yves] St. Laurent, ‘Please take this skirt from your collection and put in something else.’ It doesn’t work like that. Now, if you think the guy is no good, then you change him.”

He worked closely with Mr. Dumas, but in 1997 got the opportunity to head the high-end division of French-based cosmetics company Lancaster, controlled by the Benckiser family. At Hermès, Mr. Dumas “was only 50-something and I knew I wouldn’t succeed him before a long time,” Mr. Thomas says. Mr. Dumas died in May, 2010.

Lancaster subsequently offered him a promotion in New York, but he declined. He and his wife, who has a farm in France, were rooted in the country. He loves nature – walking in the wild, climbing mountains and bird watching – a lifestyle he saw as clashing with the one in the Big Apple.

“I didn’t want to go to New York – that’s why I said no. But I never left any company on bad terms.”

He moved on to William Grant & Sons Ltd., the first non-family member to take the helm of the liquor group, where he stayed for a few years before returning to Hermès in 2003.

He visited Toronto recently to open the Festival des Métiers, a five-day exhibition that Hermès puts on in various cities around the world to show how its craftsmen make its signature colourful scarves, Birkin bags and other handmade delicacies. It’s the kind of marketing initiative that Mr. Thomas encourages as he shifts spending to these kinds of efforts rather than traditional advertising to reach the 1-per-cent target market more efficiently.

This year, Canada is Hermès’s fastest growing market, he says. Its president, Jennifer Carter, a three-decade-plus company veteran, is Hermès’s longest serving country leader. A wealthy Asian population and tourists helped spur sales at the four Canadian stores, two of them in Holt Renfrew & Co., and an e-commerce site, he says.

Founded in 1837 by French harness maker Thierry Hermès, who produced for royal houses in Europe, Hermès added more product categories to its portfolio over the decades. Grandson Émile-Maurice recruited his friends Louis Renault and Ettore Bugatti to make trunks for cars, furniture and then belts and fashions.

Through marriage, new branches of the family developed with the names Guerrand, Puech and Dumas. But it wasn’t until 1978, when Jean-Louis Dumas was named CEO and creative director that, with the help of two cousins, Hermès got a shot of adrenalin. It relaunched the Kelly handbag and designed another one to British actress Jane Birkin’s specifications. It ran stylish ads, and refurbished stores.

Even during the downturn, when other luxury houses suffered, Hermès continued to post financial gains. Over the seven years to 2012, Hermès’s profit soared almost 200 per cent to more than $1-billion, while revenues jumped 144 per cent to almost $5-billion.

As Mr. Thomas sees it, the world of upscale purveyors is divided into the ostentatious – “bling bling” – and the others, including Hermès, which represent refined quality and the “search for perfection.” Hermès has resisted the temptation to boost profits by having its goods made in China, as other high-end houses do.

“If the family tells me, ‘We want to double the profit,’ I can do it, I don’t need LVMH,” Mr. Thomas says. “Introduce bags with a big H, at $1,500 each, and we will triple the sales and it will be an industrial bag and the sales will go through the roof and the profit will be doubled or tripled and in five years you don’t have Hermès, you have another company. It will be the same name, but the future and quality will have disappeared.”

But for all its catering to the well-off consumer, Mr. Thomas has tried to bring a measure of democracy to Hermès. About five years ago, he dropped the practice of putting customers on waiting lists for products.

“If you want a Mercedes, they will tell you nine months. At Hermès, you say five years – it’s ridiculous … People think we organize the scarcity, but we don’t.”

Rather, the company is limited by the number of artisans it can train to make its wares – there are 3,000 today in 12 workshops in France, he says. Still, a customer who orders an exotic yellow crocodile skin bag will probably have to wait a while. “You cannot grow a crocodile faster than nature.”

His biggest challenge has been having to moderate the company’s growth “in order to accept zero compromise in the product quality,” he says. “It’s very tempting to accelerate the growth with this company because it’s like a very powerful engine.”

But he also has pushed unlikely new projects, including backing Shang Xia, a Chinese brand which aims to challenge the view that Chinese-made goods are poor quality. He will remain as chairman of Shang Xia when he retires from Hermès.

He even oversaw the development of a vast, $130-million (U.S.) ecologically sustainable yacht – something of a floating mansion – in partnership with shipbuilder Wally, which Hermès has now abandoned after selling none. “We have significant profitability, so we can afford some audacious moves,” he says. “It was very good for the image of the company. Image is always a balance between modernity and tradition. Life is always a balance – the yin and the yang.”

=====================================

CURRICULUM VITAE

Personal:

Age: 66. Born June 16, 1947.

Education:

Graduate of École Supérieure de Commerce de Paris.

Career:

In 1973, joined Pernod Ricard Group, where he held the positions of secretary general of the subsidiary JFA Pampryl, director of finance and administration of Pernod Ricard and managing director of Pernod Ricard Great Britain.

In 1989, joined Hermès International as managing director. From 1997 to 2000, he was chief executive officer of the beauty company Lancaster Group. From 2000 to 2003 chief executive officer of William Grant & Sons Ltd.

In 2003, he rejoined the Hermès Group as managing director and was named chief executive officer in 2004.

In his own words:

“The customer of Hermès is not coming to a Hermès store to find an average product. They come to find something exceptional: A, because it’s expensive so people are not going to pay crazy prices for things which are average. B, because they trust Hermès for making unique things, in terms of quality.”

“From time to time when I see, for instance, in our warehouse, the selection of the hides and I say that we are crazy – we are so demanding, in terms of quality, that from time to time it’s a little bit too much. But I think that’s basically the ethics of the company. I don’t want to change it.”

“You have different ways of being an entrepreneur, you can create your own company or manage the company of others. You know this job of Hermès is quite exciting, it’s one of the most beautiful jobs I could dream of and, believe me, it’s not only administration, it’s quite entrepreneurial.”

“Being an entrepreneur is not to have the idea yourself, it’s to encourage people to have ideas... Entrepreneurship is a spirit in a company, it’s not a man. It’s like innovation – you don’t innovate because you have a creative guy in the company, innovating is a spirit which has to be shared by a company.”

“I think the rule of families is quite essential in business development. I see myself as an entrepreneur to develop the company and today Hermès is much better equipped after my 10 years of leadership to cope with growth in the years to come than it was before. We were unable to grow when I rejoined and today we are. We were facing supply chain problems and things like that. We have fixed lots of these areas.”

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