Hermes reported third quarter sales increased briskly, overperforming expectations, and outcompeting rivals as the slowing economy did not prevent its wealthy clientele from looking to pickup new ultra-luxury Birkin handbags.
Hermes’ executive vice president of finance, Eric du Halgouet, said, “Despite an uncertain context, our outlook remains unchanged.”
By mid-morning, Hermes shares were up 1.5%.
In recent weeks, analysts have been downbeat on their forecasts for the luxury sector, following a report from LVMH, which was seen as an indicator for the sector, showing shoppers were spending less on high-end fashion due to the increase in economic uncertainty and rising inflation.
However Hermes, which services the ultra-luxury sector, where a typical purchase is a $10,000 plus Birkin model handbag, has a reputation for being less effected by downturns in the sector.
Thomas Chauvet of Citi said, “Another quarter of industry-beating growth is likely to position Hermes as an interesting play in an out-of-favour sector.”
American sales were up 20%, despite the company not raising prices as high as in other regions of the world. Growth in the US was equally distributed on both coasts, according to Hermes. Also strongly contributing was the New York store on Madison Avenue, which opened in October of last year.
In Europe, sales were up 18.1%. Du Halgouet made note of the fact there was no reduction in traffic from tourists in the region, and no contraction in French sales, even in the first weeks of October.
Du Halgouet said, “We are attentive,” adding it was possible the uncertainty in the geopolitical situation could affect tourism and sales.
In Mainland China, store traffic continued to expand strongly, with an especially strong rebound in July and August, producing an acceleration in growth in the third quarter.
Luca Solca, an analyst at Bernstein, said, “This is a homogenous progression across all geographies and product categories.”
Third quarter sales came in at 3.37 billion euros, ($3.60 billion), an increase of 15.6% at constant exchange rates, beating the Visible Alpha consensus forecast for 14% growth. Sales were strong throughout all regions, especially the US.
Hermes prices have increased by roughly 7% this year globally due to increased production costs, except in the US, where prices increased roughly 3%, and Japan, where price increases were in the double digit range, due to currency fluctuations.
