Hermes defies luxury slowdown with strong sales
Reuters
Published Jul 28, 2023 07:11
Updated Jul 28, 2023 08:51
By Mimosa Spencer
PARIS (Reuters) - Sales at Birkin bag maker Hermes accelerated in the second quarter, showing the resilience of global demand for the group's high-end leather goods despite a clouded economic backdrop.
Group sales for the three months to the end of June came to 3.32 billion euros ($3.65 billion), up 27.5% at constant exchange rates, above a Visible Alpha consensus for a 22% gain, with double-digit growth in all regions.
Hermes' results come as luxury stocks have come under pressure due to uncertainty over the pace of China's post-pandemic recovery, while a months-long spending frenzy in the U.S. market cools amid rising inflation.
Lacklustre economic figures for China and more cautious outlooks from Cartier-owner Richemont (LON:0QMU) and industry bellwether LVMH (EPA:LVMH) have pushed down shares of luxury companies down in recent days.
But Hermes, which targets wealthier consumers with handbags like the coveted $10,000 plus Birkin model, and is known for weathering economic turbulence better than rivals, saw strong growth across regions.
"We've seen no interruption in (growth) trends," Hermes Executive Chairman Axel Dumas told journalists.
"In difficult times there is what you call a flight to quality and we have benefited," added Dumas.
Recurring operating income for the first half was 2.96 billion, up 28%, while margins climbed to 44%, compared to 42% in the first half of last year.
"Strong print across the board," said Exane BNP Paribas (EPA:BNPP), citing fast sales growth and consensus-beating margins.
Analysts said the results showed the strength of Hermes' business model, which entails careful management of production and stocks.
"The power of the Hermès brand is unquestionable, long waiting lists smooth out any short-term demand hiccup," said Bernstein.
Hermes shares traded up 3.3% in early morning trading, while rival Kering (LON:0IIH) was up 1% and LVMH was down 0.5%.
($1 = 0.9105 euros)
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Written By: Reuters
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