Hermes Quarterly Sales Slide 42% After Lockdowns Shut Most Stores

(Bloomberg) -- Even the maker of the iconic Birkin bag, the world’s most resilient luxury product, is feeling the brunt of pandemic-induced lockdowns across the globe.

Hermes International’s sales dropped 42% in the three months through June, the company said in a statement on Thursday. Analysts were expecting a 40% slide based on constant exchange rates.

Hermes tends to be the industry’s most hardy player in times of crisis thanks to its leather goods, demand for which has long outpaced supply. But sales at the unit sagged 40% last quarter. Rivals Prada and LVMH were also hit by plunging demand as the coronavirus outbreak forced stores to close their doors and kept shoppers at home.

Hermes fell as much as 2.5% in Paris trading despite pointing to signs of “a gradual recovery.” Almost all stores have now reopened and the company hired 300 people, mostly in production, according to Chairman Axel Dumas.

The pandemic may have even helped Hermes find more customers online -- a big topic for luxury brands.

There were months in the second quarter when all the group’s revenue came from that channel, Dumas said. What’s more, most of those sales were to clients who weren’t regular customers previously. Online sales growth is continuing in China even after stores reopened there, Dumas said.

“It’s really additional business more than a transfer” from one channel another, Dumas said in a conference call. Hermes doesn’t break down online sales.

Revenue from Asia dropped 18% last quarter, compared to a 61% slide in Europe, as countries like China and South Korea exited lockdowns earlier. Asia accounted for half of Hermes’ revenue last year.

Looking ahead, “brand desirability, exclusive price points, waiting lists on some designs and limited volume all buoy a recovery,” Deborah Aitken, analyst at Bloomberg Intelligence, wrote on July 28.

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