Hermes sales soar despite cost-of-living crisis and China Covid restrictions

HERMES International sales surged as luxury shoppers in China returned to stores after Covid-19 restrictions eased to snap up its Birkin and Kelly handbags.

Revenue rose 24 per cent to 3.1 billion euros (S$4.3 billion) in the third quarter excluding currency swings, Hermes said on Thursday (Oct 20), topping analysts’ estimates. The stock rose as much as 4.3 per cent in Paris trading.

The report offers more evidence that producers of luxury goods remain largely immune to the spending squeeze that has hurt other retailers and consumer-goods companies as a result of the cost-of-living crisis.

“For the time being, we have no signs of slowdown in any of our markets,” chief financial officer Eric du Halgouet told reporters.

The CFO said Hermes remains vigilant due to the geopolitical and macroeconomic context. But in a further sign of confidence, he said the company plans to accelerate its recruitment in the second half.

Hermes hired more than 800 workers in the first six months of 2022 and plans to take on another 800 by the end of the year, according to a spokeswoman. The group employed 18,400 people at the end of June.

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The company also plans to open a new store in Shanghai at the end of this month. Just last month it opened a new flagship store in New York City.

Sales at Hermes’s leather goods and saddlery division, the biggest unit, grew 13 per cent last quarter. The company noted a strong pickup in greater China “despite temporary closures due to sanitary measures.” Revenue in the Asia-Pacific region climbed by a third excluding Japan.

Rival LVMH, the owner of the Louis Vuitton and Christian Dior brands, is also doing better than expected. The Paris-based giant benefitted from US shoppers who splurged on luxury goods in Europe, helped by the strong US dollar, as did Hermes, according to du Halgouet.

There’s even room to raise prices. The CFO confirmed that the luxury group plans to hike product prices worldwide between 5 per cent and 10 per cent in 2023, compared with 4 per cent in 2022.

Hermes is considered one of the most exclusive brands in the luxury space, with production of its bags capped by capacity constraints. Sotheby’s last month sold its most expensive handbag ever, a crocodile-skin Hermes Kelly, for 352,800 euros at an auction in Paris.

Gucci-owner Kering will publish sales figures on Thursday after the close of trading. BLOOMBERG