Hermes Shrugs Off Hong Kong With Fastest Growth in Years
Hermes Sales Growth Accelerates to Fastest Pace in Six Years
(Bloomberg) -- Hermes International overcame the effect of Hong Kong demonstrations to post its fastest quarterly revenue growth in six years as shoppers snapped up the French luxury-goods maker’s silks and fashion.
The mainland Chinese consumers who are driving luxury sales continued to buy the French luxury-goods maker’s Birkin and Kelly handbags, even as a trade war with the U.S. dimmed forecasts for economic growth and the key Hong Kong shopping hub was roiled by weeks of anti-Beijing protests. Asia sales grew 20%.
Hermes has steadily ramped up production of its hand-stitched leather goods, but still doesn’t appear to be meeting demand. The perception of scarcity as well as the brand’s ostensibly discreet -- yet instantly recognizable -- style helps insulate the company from shocks to the industry.
Hermes’s leg-up on competition “tends to widen during difficult times,” RBC analyst Rogerio Fujimori wrote. The shares rose as much as 2.6%.
Third-quarter sales rose 15% excluding currency shifts to 1.7 billion euros ($1.9 billion). Hermes had better-than-expected performances in leather goods, fashion, silk scarves, and jewelry.
Luxury rival LVMH also beat expectations during the third quarter, with fashion sales accelerating thanks to an increased marketing spend and a craze for designer Maria Grazia Chiuri’s monogrammed tote bags at Christian Dior.
Hermes closed stores in Hong Kong for several days earlier this month, but the situation has improved for the company since then, Chief Financial Officer Eric du Halgouet told journalists Thursday.
The CFO said Hermes sees no change in trend in China in the first weeks of the fourth quarter after an “outstanding” performance so far this year. Beijing’s recent cuts to import duties and sales taxes encouraged consumers to do more shopping at home.
Hermes opened up its 26th store in China in July, and has been ramping up e-commerce since launching its first online store there last year.
Silk is making a comeback after a string of sluggish quarters, helped by new releases in women’s scarves, the CFO said. Men’s scarves are also growing fast, but neckties remain more difficult.
Shares in LVMH, Burberry, and Prada rose on Hermes’s strong report, while Kering shares fell slightly. The Gucci and Balenciaga owner, which is set to report shares after markets close, is facing persistent skepticism that its crystal-studded sunglasses and chunky sneakers can continue to drive rapid growth.
To contact the reporter on this story: Robert Williams in Paris at rwilliams323@bloomberg.net
To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, Thomas Mulier, Corinne Gretler
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