On Thursday, luxury brand Hermes announced a substantial growth in sales for the third quarter, unaffected by the economic slowdown in China unlike its competitors, as the allure of Birkin bags priced over $10,000 continues to attract wealthy consumers.
In the three months ending in September, Hermes reported revenue of 3.7 billion euros ($3.99 billion), a growth of 11.3% at constant exchange rates, in line with analysts’ consensus estimates cited by Jefferies.
Meanwhile, luxury powerhouse Kering Group warned that soft demand in China is hindering the recovery of its flagship brand Gucci, potentially leading to the lowest annual profit since 2016.
Hermes stated that despite global economic, geopolitical, and currency uncertainties, the company still expects mid-term revenue growth at constant exchange rates in the future. The company also mentioned plans to continue recruiting.
James Grzinic, an analyst at Jefferies, stated in a report that Hermes’ sales growth “confirms the resilience of its leading industry position, benefiting from the higher-end components in the group’s products,” such as leather goods and apparel.
While the entire luxury goods industry is experiencing a slowdown affecting many high-end brands, Hermes’ iconic designs and strict management of production and inventory have helped strengthen the brand’s uniqueness, making it one of the most stable performers in the industry.
Although Birkin bags are priced above $10,000, they remain a coveted item for the wealthiest shoppers who are typically less affected by economic turbulence.
The slowest growth was seen in the Asia-Pacific region (excluding Japan), where sales only increased by 1%. Eric du Halgouet, Hermes’ Deputy Chief Financial Officer, told reporters over the phone that the region’s performance was relatively consistent.
“In China, the trend has not broken, and we still face a decrease in foot traffic starting after the Chinese New Year, but there hasn’t been further decline,” du Halgouet said.
Sales in Europe, Japan, and the Americas exceeded expectations in this quarter for Hermes, while the growth in regions including China was only 1%, falling below the expected 2.3%. All departments except for the watch division saw growth, with the watch division declining by 18%, twice the expected decrease.
Du Halgouet added that despite a slowdown in foot traffic in Chinese stores since the beginning of the year, Hermes’ performance remains strong, as its most loyal customers are still willing to purchase the most expensive products like jewelry, handbags, and ready-to-wear clothing.
He further stated that sales in France grew by 13.1% during this period.
Since the beginning of the year, Hermes’ stock price has risen nearly 9%, outperforming competitors such as LVMH, down nearly 15%, Moncler, down 3.3%, and Kering Group, down 40%.
Luxury leader LVMH’s performance announced last week fell short of expectations. The company stated that Chinese consumer confidence has dropped to its lowest point since the pandemic, leading to a deterioration in demand for fashion goods in this quarter.
(This article references reports from Bloomberg and Reuters)