Hermes sales soar as US demand for Birkin bags stays strong
HERMES sales and profit jumped as the maker of Birkin bags stood out from its luxury-industry rivals with unabated demand for its high-end purses, notably in the US and China.
First-half earnings and second-quarter sales growth beat analysts’ estimates. Revenue in the Americas in the second quarter grew 21 per cent at constant exchange rates, almost double what analysts expected.
Hermes is outperforming its rivals like LVMH Moët Hennessy Louis Vuitton and Cartier owner Richemont, which have reported weaker demand in the US after strong spending on luxury goods in the past two years.
Demand trends for early July haven’t changed in any region, executive chairman Axel Dumas told reporters in a call on Friday (Jul 28).
“In difficult moments, there’s what we call in finance the flight to quality, so we’ve benefited from it,” Dumas said, adding “I don’t want to jinx it.”
Recurring operating profit advanced 28 per cent to 2.95 billion euros (S$4.3 billion) in the first half, and the margin reached 44 per cent.
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Analysts consider Hermes to be in a category of its own as far as pricing power is concerned as demand for its handbags consistently surpasses its capacity to produce them. That means many bags enjoy higher resale values.
“Hermes blows the whole luxury goods industry out of the water,” wrote Luca Solca, an analyst at Bernstein. “Hermes stands head and shoulders above anyone else.”
Dumas said Hermes has no plans to further boost product prices this year after January’s hike.
The Kelly bag maker aims to open one new leather manufacturing facility per year in France in order to maintain a growth of around 7 per cent for its leather goods.
Shares in Hermes have outperformed its luxury rivals, jumping by around a third this year. The company saw its market capitalization cross the symbolic 200 billion euro threshold earlier this year. BLOOMBERG
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