Hermès Q4 Sales Up 23 Percent on Strong Global Demand
PARIS — Riding on a strong fourth quarter, Hermès International finished the year with sales up 23 percent at constant exchange rates to 2.99 billion euros, led by 32 percent growth in the Americas in the last three months of 2022.
The quarter topped a year of exceptional results for the company, with revenue up 23 percent at constant exchange to 11.6 billion euros.
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All of this comes amid price increases of 4 percent last year, and an announced price increase of 7 to 10 percent over the coming year, but luxury customers were not deterred.
The continued climb in sales proved the ongoing resilience of what chief executive officer Axel Dumas called the “intangible capital” of its brand. That identity has boosted the Hermès name amongst younger customers seeking to bask in a bit of the luxury glow, Dumas said, particularly in the U.S. and Asia.
“There’s been a middle class, larger in number, younger and richer,” he said. “What you see arriving in China and in the U.S. is the middle class, new customers who don’t necessarily buy our most expensive products but that are part of this success.”
With its singular cachet, Hermès is less in competition with other brands than with experiences and travel for these young consumers, he asserted in a conference with analysts webcast from its revamped rue des Sevres store in Paris.
Revenues in the Americas gained 40.8 percent in constant currency in the fourth quarter, and 32 percent year-over-year compared to 2021, following the opening of a Madison Avenue flagship in April and the revamp of the Hermès’ store in Guadalajara, Mexico, in October.
Chinese recovery was steady as the country exited pandemic-era restrictions with fourth quarter up 24.7 percent, and full-year sales up 22 percent.
Dumas said he believed that “sometimes people tend to overdo things in talking about the health crisis in China,” where the brand continued with steady sales throughout the two-year time period. Dumas emphasized that this is less a recovery than the continued “strong situation” in China where online sales and home delivery allowed the company to keep a solid position there during the country’s zero-COVID-19 rolling shutdowns.
Looking ahead in China, Dumas said that the reopening had led to waves of illness that mostly affected employees and resulted in some store closures due to lack of staff more than any reduction in customer demand. He highlighted a particularly strong demand through the Chinese New Year celebrations that took place in January.
The company’s home country of France also showed strong growth on the return of tourists, up 27 percent with an emphasis on the year-end holiday season. Hermès highlighted its new store in Strasbourg, which opened its doors in November.
France has benefited from tourists who returned to Paris in droves in the second half of 2022. Americans, in particular, took advantage of the strong dollar to snap up Hermès goods. “There was an opportunity cost, so to speak, but customers were not affected because it’s the pleasure of being in Paris,” Dumas said.
Europe was the sole weak point in the fourth-quarter results, with growth for the holiday period at 4.8 percent at constant exchange, though it was up 18.4 percent year-over-year.
Dumas noted that the Europe numbers had been impacted by the closure of its Russian business following the invasion of Ukraine, which had previously been “an important source of growth,” and that the continent is seeing some knock-on effects from the conflict.
The strength in Europe is local clients, who tend to purchase furniture and home goods.
Dumas highlighted a rebound in Italy but noted that Spain is moving slowly despite the opening of a new flagship in Barcelona, Spain.
Dumas said he does not expect a quick resurgence of Chinese tourists to Europe, but believes that travel will be more regional, particularly to Hong Kong and Japan, and other luxury destinations within Asia. As a result, the company will continue to invest in expansion of stores and recruitment of salespeople throughout the region.
China will “speed up” he said, adding that communications spend would increase with an emphasis on events.
In Japan, sales were up 15.7 percent in the fourth quarter and 19.7 percent year-over-year, with a new store opening in Nagoya and an exhibition in Kyoto flying the house’s cultural flag, which boosted sales.
Watches led the way for the company, with sales in the division up 46 percent year-over-year with a steady 21.4 percent growth at constant exchange in the last three months of 2022. Hermès’ newest H08 men’s model was a standout, the company said. Winning the Geneva Watchmaking Grand Prize for its Arceau Le temps voyageur model in November demonstrated its strength in the sector, Dumas said.
Hermès’ fashion division for both men and women continued to accelerate, particularly on the strength of footwear, showing a 36 percent boost in sales. Dumas trumpeted extremely high sell-through rates of its latest collections. He noted that without celebrity designers behind them, the company’s ready-to-wear might “not be the most well known” division, and long-term local customers tend to be the biggest consumers of these pieces.
The leather goods division was up 25.3 percent in the fourth quarter at constant exchange and 15.4 percent for the year. Dumas cited limited production capacity and difficulties in finding leather that meets its standards.
Dumas also noted that price pressures and industrial production have caused increased depression and suicide rates in farmers. To that end, the company is working directly with farmers to try to increase supply and quality.
Beauty and perfume saw 7.4 percent growth in the fourth quarter and 15 percent year-over-year at constant currencies.
The company opened a new school for salespeople in 2022, and is working on opening a new factory dedicated to enamel goods including jewelry that is planned for the Limoges region within the next two to three years.
Dumas said that separating e-commerce numbers from in-store sales is “pointless,” but that online continues to be a strong channel for the company. “We have seen digital commerce skyrocketing during COVID-19, and that’s an ongoing, continuing trend.” It continues to invest in tech to become a “truly omnichannel” company, he said.
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