HERMES sales jumped in the second quarter as the Birkin bag maker weathered the luxury demand slowdown better than peers, thanks to its reliance on the wealthiest clients.
Revenue at constant exchange rates rose 13.3 per cent, Hermes International said on Thursday (Jul 25), above analysts’ expectations. First-half recurring operating income amounted to 3.2 billion euros (S$4.7 billion) slightly lower than estimates. All regions grew by double digits except for the area that includes China.
Hermes’ American depositary receipts rose 3.5 per cent in New York trading following the results. Its Paris-listed shares have gained about 5 per cent this year to Thursday’s close.
The company’s results tend to be more resilient than other luxury houses because it enjoys strong pricing power and long wait lists for its most coveted products, such as its Kelly and Birkin handbags, which start at about US$10,000.
Speaking to reporters, executive chairman Axel Dumas said Hermes is not seeing a change in trends so far this quarter.
The company is experiencing softer demand for its more affordable goods such as silk scarves, reflecting a curb in spending by aspirational customers, Dumas said. But Hermes’ two biggest units, leather goods and saddlery and ready-to-wear and accessories, saw double-digit growth rates.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Dumas also said the Olympic Games – which officially kick off with an opening ceremony in Paris on Friday evening – typically do not favour business in host cities. He’s hoping the French Riviera will compensate for a loss of traffic in its Parisian stores this quarter.
Hermes results follow disappointing performances at LVMH Moet Hennessy Louis Vuitton, the owner of Christian Dior and Tiffany & Co, and Kering, which is going through a challenging turnaround at Gucci, its biggest label.
Overall, the results this week suggest that wealthy consumers have been reining in spending across much of the globe, with the exception of Japan, where overseas travellers from China and elsewhere are taking advantage of the weak yen to snap up high-end goods.
Although Japan performed well for Hermes in the last quarter, Dumas explained it was mostly led by local customers. BLOOMBERG
