Hermes sales beat forecasts as appetite for luxury goods rises

·3-min read
HONG KONG, CHINA - 2020/10/07: A pedestrian wearing a facemask walks past the French high fashion luxury clothing manufacturer Hermes store seen in Hong Kong. (Photo by Budrul Chukrut/SOPA Images/LightRocket via Getty Images)
Revenues at the end of the latest quarter were €2.37bn (£2bn, $2.76bn), 40% above their pre-pandemic 2019 levels. Photo: Budrul Chukrut/SOPA Images/LightRocket via Getty Images

Luxury fashion retailer Hermes International (RMS.PA) shrugged off a slowdown in China, beating forecasts as demand for luxury goods continued to rise.

The maker of Birkin bags posted a 31.5% increase in revenue in the third quarter of the year, compared to the same period a year ago, surpassing the 21% rise expected by analysts.

Revenues at the end of the latest quarter were €2.37bn (£2bn, $2.76bn), 40% above their pre-pandemic 2019 levels, at constant exchange rates, the company revealed on Thursday.

Its strong performance was driven by the easing of COVID-19 lockdown restrictions across the world, as customers returned to physical stores and spent their savings. Hermes benefited from an upturn in sales in Europe and an acceleration in America also.

“The performance of the third quarter reflects an atypical year, during which we continue our strategic investments and accelerate job creations,” Axel Dumas, executive chairman of Hermès, said in a statement.

“In a world that remains unstable, the balance between our 16 métiers and between our locations around the world, allows us to move forward with optimism and caution while continuing to create beautiful, high quality, sustainable objects.”

Read more: Luxury stocks rise as LVMH results signal strong demand

However, spending by travelling tourists still remains muted thanks to rising coronavirus cases in Asia over the summer, including China which is the company’s biggest market.

In August, China’s President Xi Jinping also called for "common prosperity" and wealth redistribution, causing investors to worry that Beijing might promote measures to reduce the country’s wealth gap.

"We have observed in China in recent quarters an acceleration of store traffic, an improvement in conversion rates and an increase in average baskets," Eric du Halgouët, chief financial officer, said.

“This new clientele is brought, in part, by online sales, which have contributed strongly to drawing this new clientele into our stores.”

The French firm added that despite a high comparison base in the fourth quarter, it is approaching the year-end with “confidence.”

Shares were 1.6% higher on the day in Paris.

Hermes International rose on Thursday on the back of the news. Chart: Yahoo Finance
Hermes International rose on Thursday on the back of the news. Chart: Yahoo Finance

It comes as LVMH Moët Hennessy Louis Vuitton (MC.PA) also revealed a rise in demand in its third-quarter last week.

Sales at the French group’s fashion and leather goods division jumped 38% to €7.4bn (£6.3bn, $8.6bn) on an organic basis compared to the same period in 2019.

Its Louis Vuitton brand, which brings in the majority of profit, continued to see strong demand in the US and China, it said, with quarterly revenue across the business at €15.5bn. Analysts had expected revenues of €15bn.

The company, which owns brands including Dior, Givenchy, and Marc Jacobs, said it was “confident” the current momentum would continue even if the recovery from the pandemic is becoming less dramatic.

Watch: What are SPACs?

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting