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Strong demand for its exclusive handbags drove revenues at French luxury group Hermès up by 17 per cent in the first three months of 2024, defying a wider slowdown in luxury sales.
The maker of Birkin and Kelly bags said sales rose 17 per cent on a like-for-like basis in the first quarter to €3.8bn, beating consensus analyst expectations of 13 per cent growth, and giving it the industry’s fastest revenue gains so far in the period.
“The solid sales growth in the first quarter 2024 reflects the loyalty of our clients worldwide, the strength of the group’s artisanal model and the desirability of our creations in a more complex environment,” said executive chair Axel Dumas.
The company outpaced larger rival LVMH, where sales increased 2 per cent on a comparable basis, and at Kering, where plunging performance at its biggest brand Gucci dragged group revenues down 10 per cent in the first quarter. Hermès also defied concerns about weakening demand in the key Chinese market as the economic outlook there darkens.
The Paris-based group maintained double-digit growth across all regions, including in Asia, excluding Japan, where sales expanded by 14 per cent. However traffic in greater China did soften after the lunar new year, the company noted.
“Hermès continues to impress with growth mirroring the performance of Moncler and Prada yesterday, and the beat stemming from leather goods and jewellery,” said Thomas Chauvet, analyst at Citi. “Shares have outperformed the sector this year . . . following consistent outperformance since 2018.”
Hermès is one of the most reliable performers in the luxury sector, with its high-end clientele and demand for key products outstripping supply and helping it to defy downturns. While rivals took a hit at the end of 2022 because of strict zero-Covid lockdown measures in China, Hermès’s business did not suffer a setback.
The luxury industry as a whole has been slowing down over the past year as an unprecedented pandemic-era boom comes to a close. Consultancy Bain expects the market for personal luxury goods to grow by 1 to 4 per cent in 2024, down from an estimated 8 to 10 per cent in 2023. However Hermès is expected to be at the head of the pack despite the more challenging outlook.
“In a year of normalisation for the luxury sector, Hermès will likely deliver double-digit revenue and earnings growth, supported by 8-9 per cent pricing and further solid volume growth in non-leather categories,” Chauvet wrote.
The company’s leather goods, ready to wear, jewellery and homewares divisions all grew by double digits, with watch sales one of the few points of weakness, underperforming expectations.
Shares in Hermes pared some gains following an almost 25 per cent rise in the year to date, falling by 2.5 per cent in morning trading on Thursday. It takes the group to a market capitalisation of about €248.bn, slightly narrowing the gap opened against peers.
LVMH is up 9 per cent so far this year, Cartier-owner Richemont up 14 per cent and Kering down 17 per cent.
