Hermès Sales Jump 23% in Q1
PARIS — Not even prices increases can curb the hunger for for Hermès.
Continued pent-up demand for the group’s luxury goods boosted sales 23 percent in the first quarter to 3.38 billion euros, despite upping the price tags an average of 7 percent — as high as 10 percent in some regions.
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Sales were strong across the board — all regions showed impressive growth, as did all categories from watches to ready-to-wear, handbags to homewares.
While Hermès International raised prices in the first quarter, it also increased production capacity, yet it is still seeing strong sell through and having trouble keeping goods in stock.
China continued its celebratory rebound with strong spending over the Chinese New Year holiday. But it’s not just China. Strong growth was consistent across Asia, Europe and the U.S, as well as surprising leap in sales in Japan.
“The Chinese are picking up and rebounding faster than we could potentially anticipate,” said Bernstein analyst Luca Solca. Considering global economic headwinds, analysts expected consumers in the Europe and the U.S. to temper their spending after the holiday season. Prices were upped just 3 percent in the U.S., indicating that organic sales — not just heftier price tags — drove the numbers, and clients were mostly locals.
Americans also spent their money abroad, with U.S. and Middle Eastern tourists boosting sales in Europe, while an increase in in-store traffic helped in the U.S. “That moderation is not happening abruptly,” Solca said.
If Americans start to hold on to their dollars, “Chinese consumers will take the baton from the Americans and Europeans,” Solca said.
The luxury company also benefited from the return of in transit spending, up 26 percent, with tourists returning to Europe in droves and snapping up leather goods at airports.
Chinese tourists traveling within Asia are boosting sales in the region, in Hong Kong and Macau, but they haven’t returned en masse to farther flung regions.
The results came in well ahead of analysts’ consensus, which had predicted 16 percent growth. The numbers looked similar at current exchange, up 22 percent, in the three months ending March 31.
The news boosted Hermès shares, which were up 1.15 percent in morning trading. Hermès passed the 200 billion euro line in market capitalization in early April, a sign of continued strength of the company.
“The first quarter of 2023 is aligned with the good results of 2022 and reflects the success met by our collections all over the world, driven by the loyalty of our customers. We are proud to strengthen our production capacities and consolidate our artisanal model,” chief executive officer Axel Dumas said in a statement. He cited the company’s approach of local anchoring as a source of the company’s strength.
It’s another signal of insatiable demand in the luxury sector, following LVMH Moët Hennessy Louis Vuitton’s strong first-quarter numbers reported Wednesday.
Hermès maintained its positive outlook for the future, “despite the economic, geopolitical and monetary uncertainties around the world.”
Price increases of up to 10 percent have not curbed consumer appetite for the brand.
Wealthy customers are not deterred and that big spend helped boost the bottom line. “Higher exposure to richer consumers is probably also helping,” Solca said. Hermès is “leveraging its high brand desirability and waiting lists for iconic products.”
The company’s global balance and local strategy — it just inaugurated its 40th store in the U.S. in Naples, Florida, and has opened shops in Detroit and Austin, Texas — insulates it from overreliance in any region.
It was an especially strong start to the year in Japan, where sales leaped 26 percent. Local customers were driving sales in the country, despite rising inflation and wage stagnation there. It was a particular surprise as Hermès has raised prices in the country 10 percent since last year.
“Consumers are in love with the brand,” and continue to buy despite the increases, Solca said.
Chinese New Year spending boosted Asia excluding Japan, with sales up 23 percent in the region. Singapore and Thailand were hailed as particular growth markets, as sales across Asia were up to 1.76 billion, accounting for more than half of the group’s sales.
The tourist flows into Europe boosted sales in the region, with Hermès home country of France up 28 percent to 273 million euros. The rest of Europe was up 21 percent. The return of international travelers drove sales, with U.K. and Italy leading the region.
The Americas checked in just under 19 percent growth with 556 million euros in sales, with the U.S. being a particular strong point. The company’s strength there was a standout against other companies in the sector, as LVMH had characterized the region as “soft” in its results earlier in the week.
While prices increased in the Americas, the region benefited from a smaller increase at just 3 percent, a less precipitous rise than the global 7 percent average.
Sales of leather goods and saddlery rose 18.5 percent to 1.41 billion euros, driven by handbags, including the Kelly model. Hermès has been upping its output to meet demand, aiming for a 7 percent increase this year.
A factory in Louviers, France, opened on April 7 and is focusing on increasing production of the popular bags. Another factory in the Eastern region of France is slated for a May opening and three others are under construction, due to roll out over the next two years.
The group’s ready-to-wear and accessories category gained 34 percent, up to 950 million euros.
An “outstanding” performance in the watch sector on the strength of its H08 line, Arceau and Le temps voyageur models boosted sales 25 percent to 166 million euros.
In jewelry and homewares, sales were up 28 percent to 421 million euros.
Sales of silks were up 20 percent to 234 million euros, which traveled with the Kite Festival event across diverse locations including Argentina and Dubai.
Beauty sales were up to 126 million euros, just under 7 percent growth in the category.
“The group has moved into 2023 with confidence, thanks to the highly integrated artisanal model, the balanced distribution network, the creativity of collections and the loyalty of clients,” the company added.
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