This article was updated on October 24th at 12:50pm EST
PARIS — What is luxury slowdown? Hermès International continues to buck this trend and outperform its peers, reporting third-quarter sales growth of 11.3% at constant currency to €3.7 billion.
This puts the Birkin bag maker behind other French companies such as Kering, which reported a 16% drop in sales, and LVMH Moët Hennessy Louis Vuitton, which reported a 4.4% drop in third-quarter revenue due to China issues. of luxury goods companies. .
Hermès continues to grow due to its resilience and loyal customer base, especially in Asia and the US Thanks to its exclusivity and popularity as a brand, as ultra-high-net-worth customers seek security from the brand , weathering the storm better than its flashier major rivals.
“The most important reason why Hermès performs so well is because of their desired leadership. If you are the most desirable brand, you will be the last brand that consumers give up on.” Bernstein analyst Luca Sorca told WWD. “It’s that simple.”
Even as consumers become more cautious, Hermès’ exclusivity has helped push out competitors. “Many customers perceive Hermès products to be a good investment as they tend to retain high value over the long term,” said Third Bridge analyst Yangmei Tan.
This result easily exceeded the 10.5% growth expected by analysts. “We believe Hermès is the best opportunity at this moment to protect the portfolio from the difficult (fourth quarter) situation suffered by the slowdown in the global economic cycle, which has been exacerbated by structural problems in China,” Sorca said. ” he added.
Hermès shares rose 1% by the close of trading, contributing to stability across the luxury goods sector. Kering’s stock price closed 2% higher despite the drop in sales reported in Wednesday’s results and the stock’s first decline since the start of the year.
Hermès’ China outlook remains strong. In a conference call following the announcement, Hermès executive vice president of finance, Eric Du Arghouet, said a slowdown in retail footfall in China after the Lunar New Year in February was offset by an increase in average spending.
“It is important that our customers remain loyal in China, which allows us to continue to sell our products there,” he said. Thanks to Hermès’ bottom-up local ordering model, inventory has stabilized, especially for handbags.
The executive touted Hermès’ continued strength in China even as competitors stumble.
“What has surprised us most over the past three quarters is probably the resilience of our group compared to other brands, and in contrast, the resilience of Hermès, particularly in Greater China, compared to other companies in the industry. ” he said. Weak sales of handbags were offset by increases in jewelry and ready-to-wear.
De Arghouet said foot traffic has slowed more noticeably in Hong Kong, partly because local customers are traveling to mainland China, particularly Shenzhen, to shop. Hermès is opening a renovated store in the city this week, which should capture some of the influx of local tourists.
Inside the newly renovated Hermes store in Shenzhen, China.
Sui Shicon / Provided by: Hermes
Sales in Japan rose 23% in the three months to September 30, due in part to strong local customer demand. According to Du Arghouet, fewer than 10% of sales in Japan come from tourists seeking cheaper products due to the weak yen. The company opened a new store in Tokyo in June, making it the second new store in Japan this year.
The rest of Asia (excluding Japan) recorded 7% growth, supported by sales in South Korea, Singapore, Thailand and Australia, where the company opened a renovated store in Melbourne in June. He said a slight slowdown in sales volumes in the region was being driven by rising values.
Chinese customers are staying at home and spending less overseas, especially in France and Europe. Although these regions suffered a bit from a decline in Chinese tourists, travelers from the United States and the Middle East filled the tourist gap.
Performance in the Americas remained stable, with third-quarter revenue up 13%, roughly on par with recent quarters. Most of those are domestic customers, and sales are “off to a strong start in October,” Du Argoet said.
Europe, excluding France, increased by 18% due to strong tourist flows throughout the summer.
In France, sales increased by 14%, although there was a slight slowdown in Paris due to the Olympics.
The company’s three stores in the capital took a hit in July and August, but that was offset by an increase in tourist traffic to the south of France. The game helped the Paris store recover, with sales increasing in early October, Du Arghouet said.
Du Arghouet was keen to stress that the strong numbers were not due to price increases, but to sales volumes. The company raised prices by about 9% at the beginning of the year, but expects them to rise further in early 2025 to offset the negative effects of inflation, wage increases and currency exchange rates.
However, next year’s price increase will not be as steep. “In any case, we won’t reach this year’s level of 9%. We’ll go much lower,” Du Arghouet said.
As the price of gold continues to rise, jewelry is one category that is being revalued.
The watch category proved to be the weakest point, with third-quarter sales down 18.2%, the only category to decline. Du Hargouet said part of that was due to the lack of the third-quarter “Craft Time” sales event, which was moved to November this year, and a category-wide decline across brands.
Still, the design will be appreciated. “There are very few issues that we have to address regarding our product offering and we intend to address them in the near future,” he said, suggesting Hermès would reconsider the “design and actual shape” of its watches.
The decline in watches is in sharp contrast to the silk sector, which increased 4% year-on-year, and the beauty sector, which increased 10.6% year-on-year. Both are considered ambitious categories for the company at low price points.
Hermès opened a new silk production facility in Lyon in June to meet demand. “We believe that even if this particular métier suffers in China, it still has great potential for growth,” Du Hargouet said.
Leather sales rose 14% in the third quarter as the company introduced new handbag models and increased production capacity at its new factory in Riom, central France, which opened in September, making it the company’s 23rd leather It became a product factory. Leather production capacity increased by about 7% last year.
Hermès Spring 2025 ready-to-wear collection debuts at Paris Fashion Week
Giovanni Giannoni/WWD
The ready-to-wear division continued to grow, with sales increasing 13.5% year over year, and the company’s jewelry sales rose 13.6% in the quarter, primarily from gold products. The company’s fine jewelry collection continues to perform well, “but it is not the main driver of growth,” Du Arghouet said.
“The rapid increase in demand for non-leather categories such as ready-to-wear and accessories is driven by fashion trends and increased purchases by women and younger consumers,” said Third Bridge’s Tan.
Consolidated revenue for the first nine months of this year rose 14% year-on-year to €11.2 billion in constant currency, despite the company taking a €242 million hit from currency fluctuations.
The company expects to be further hurt by negative currency movements in the fourth quarter, but its guidance remains unchanged, said Carol Duponpietri, head of investor relations.
“In the medium term, despite the economic, geopolitical and financial uncertainties around the world, the Group confirms its ambitious goal of growing revenues at constant exchange rates.” the company said.
