Hermès Sales Jump 24.3% in Q3 on Strength of Asia, U.S.
PARIS — There were no hurdles for Hermès International as it continued its winning sales streak in the third quarter. Revenues were up 3.1 billion euros, boosted by Asia and the U.S., with currency fluctuations working in its favor.
Sales were up 24.3 percent in the third quarter. That handily beat analyst predictions, with a consensus estimate of 15.3 percent growth at constant exchange, and forecast sales in the 2.9 billion euro ballpark.
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“The strong performance in the third quarter reflects the desirability of our collections all around the world and the relevance of our values. We move forward with confidence and caution while continuing to bolster our integrated model, rooted in France and committed to job creation,” said chief executive officer Axel Dumas.
The brand’s desirability did not dim even in the face of increasing prices. Hermès upped its prices by an average of 3.5 percent in January across divisions, and added another increase of 3 percent to 5 percent for its watches and jewelry in July as a result of the rising cost of gold.
The company cited its French roots, integrated craftsmanship model and distribution network in maintaining a measured outlook for the rest of 2022. With economic and political headwinds “still difficult to assess,” the company reiterated its customary guidance of “ambitious goals for revenue growth at constant exchange rates.”
The company indicated they will continue the price increase strategy unabated, targeting additional 5 percent to 10 percent raises in 2023. Those increases will hit Europe and Japan at a higher rate, with the U.S. and China less so.
The company also noted that online sales growth is outpacing in-store purchases, moving roughly 10
Following the stellar results of LVMH Moët Hennessy Louis Vuitton reported last week, the continued buoyancy of the luxury sector “suggests that the high-end global luxury goods demand has yet to normalize,” Bernstein analyst Luca Solca said in a note following the release.
Shares opened 3 percent higher following the news.
Revenue for the first nine months ending Sept. 30 were 8.61 billion euros, up 23.6 percent at constant exchange year-on-year.
Currency fluctuations boosted revenue by 451 million euros. The company used the extra cash to purchase more than 100,000 shares of its stock in a buyback valued at 116 million euros in the first nine months of the year.
Asia outside of Japan had a particularly strong showing, up 33.7 percent in the third quarter, as retail maintained steady demand in Greater China despite temporary lockdowns in Macau, Chengdu and Dalian over the summer. Outside of mainland China, the company cited continued strength in South Korea, Thailand and Singapore. The strong rebound of the region particularly boosted global leather goods sales, which were up 13.2 percent, with Greater China’s sustained demand cited by the company.
Analysts for Barclay’s said the figures were “very encouraging,” noting that the sales in China were mostly organic — meaning not related to the brand’s price increases — and showed continued momentum in the region.
Sales in Japan were up 22.7 percent, with the company citing the “loyalty of local clients,” as the country maintained strict travel rules for tourists entering the country until Oct. 11.
Following the opening of its Madison Avenue flagship and an outpost in Austin, Texas, sales in the Americas were up 18.1 percent in the third quarter.
Sales in Europe were boosted by the return of tourists and the weak euro, up 11.7 percent and particularly strong in the U.K. and Italy. In France, which also benefited from a major influx of tourists, sales jumped 10.9 percent in the third quarter.
Broken down by category, the performance of the watch division was up a “remarkable” 55.2 percent in the third quarter, thanks to the year-old H08 line and the brand’s Cape Cod and Heure H pillar lines.
Another exceptionally strong category was ready-to-wear and accessories, up 42 percent, with continuing strong momentum in both men’s and women’s categories.
Silk and textiles, which includes the brand’s famous scarves, were up 22.9 percent, supported by increased production capacity with a new factory in Lyon, France. The combined homewares and jewelry category rose 31 percent.
A 7.4 percent increase in the perfume and beauty sector was credited to the success of the new H24 fragrance, which was launched in the first quarter of 2021. Limited color launches in the makeup line were also framed as successes.
The results follow a stellar first half of the year. The company reported a record operating margins of 42 percent and an operating income of 2.3 billion euros, in results reported in July.
LVMH reported 19 percent growth in results released earlier this month, and Gucci and Saint Laurent parent company and Kering reported a 23 percent sales gain on Thursday.
