Hermès expects no slowdown in the United States, as sales increase by 23%

Hermès Sales

Hermès sales increased by 23% in the first quarter, above market expectations, as wealthy buyers in China and Europe splurged on luxury fashion and accessories despite higher prices and global financial upheaval.

In early trade, shares were up 1%.

Hermès finance head Eric du Halgouet told journalists that store traffic in the United States, where rival LVMH reported lower demand for fashion, leather goods and jewellery earlier this week, had continued to climb.

“What we’re seeing in the United States is a global increase in (store) traffic; the trends we saw in April continue to be favourable, with, once again, very dynamic traffic,” he said.

“We obviously remain vigilant in terms of macro trends… but we have not seen a slowdown thus far.”

According to Bernstein analyst Luca Solca, the group’s strong US growth was particularly notable, with a 19% increase in sales in the Americas region compared to LVMH’s 8% gain.

“It confirms Hermès’ superior ability to navigate adversity, leveraging its high brand desirability and waiting lists for iconic products,” he said.

“Higher-end exposure to wealthier consumers is probably also beneficial.”

Hermès has a reputation for weathering downturns better than competitors, because to its classic styles that appeal to older and wealthier buyers who are less susceptible to economic downturns.

Careful management of manufactures and stockpiles has contributed to the label’s aura of exclusivity, and its prized $10,000+ Birkin handbags generate waiting lists and sometimes grow in resale value.

Hermès last week established a new factory in Normandy that creates Kelly handbags — a type designed in the 1920s that became linked with actress Grace Kelly in the 1950s — as part of its aim of boosting production at a rate of roughly 7% per year.

Hermès has also been investing in the United States, where it earned 18% of its annual sales last year, opening outlets in Florida and Texas, as well as on New York’s Madison Avenue.

For the three months ended in March, group sales totaled €3.38 billion ($3.74 billion). At constant exchange rates, the gain of 23% outperformed the Visible Alpha consensus of 15% growth.

Revenue increased by 23 percent in China, where Hermès was less affected than competitors by lockdowns that hampered sales for several at the end of last year. Asia, excluding Japan, accounts for over half of the group’s yearly sales.

Du Halgouet stated that tourist flows from mainland China have restarted, increasing business in Hong Kong and Macau, as well as Singapore and Australia, and that he expected Chinese consumers to gradually return to Europe by the end of the year.

According to consultancy Bain, strict Covid lockdowns impacted luxury demand in China last year, when the market fell 10%, interrupting a five-year growth streak that saw the market treble between 2019 and 2021.

Tanks For Reading

Leave a Reply

Your email address will not be published. Required fields are marked *