Hermès sales rise as brand shows resilience during luxury slump

[PARIS] Hermès sales rose in line with expectations as the Birkin bag maker weathered a downturn in the demand for luxury goods better than its peers.

Revenue rose 6.7 per cent at constant exchange rates in the second quarter to about 4.1 billion euros (US$4.7 billion), Hermès International said in a statement on Wednesday (Jul 29). Analysts were expecting a gain of 6.51 per cent.

The conflict in the Middle East and a pull back by aspirational buyers of high-end goods has hit the wider luxury industry. But Hermès has shown resilience thanks to its managed-scarcity-driven model and the long waiting lists for its products, particularly for its coveted Kelly and Birkin handbags.

Growth in the last three months for the brand was led by the Americas, which chalked up gains of 13.7 per cent. France, a major tourist destination, grew 6.2 per cent, while the region that includes the Middle East improved sequentially even though it was still negative. That region “demonstrated remarkable resistance in an unstable geopolitical environment,” the company said.

Hermès’ report follows mostly disappointing results from market leader LVMH Moët Hennessy Louis Vuittonas as well as Burberry Group and Moncler. Those brands have a larger exposure to fashion and leather goods. But Richemont’s strong results, helped by its jewellery brands Cartier and Van Cleef & Arpels, signalled consumers are still willing to splurge on luxury goods but are being more selective.

Before Wednesday, shares of Hermès had fallen about 20 per cent in Paris this year, with some analysts questioning whether the brand needs to take the difficult but necessary step of scaling back its production of leather goods to maintain its brand equity. BLOOMBERG