Hermes Sales Soar as Shoppers Stick to Top Luxury Brands

Hermes International sales jumped as the Birkin bag maker continued to benefit from its established appeal as a premium luxury brand.

Sales rose 16% in the fourth quarter at constant exchange rates, almost twice as much as analysts expected. The leather goods unit was the main driver behind the performance. The shares rose as much as 8.9% to a record.

Hermes, also known for its silk scarves, joins LVMH in reporting better-than-expected results as luxury shoppers turn their attention to established premium brands including Louis Vuitton and Dior during the pandemic.

The results contrast with Kering SA’s Gucci, whose sales declined last quarter. As opposed to the Italian fashion brand, Hermes has benefited from a strong customer base in European countries. For most luxury companies, the region has been the worst-performing amid a lack of Chinese tourists, shoppers who have helped drive growth at Gucci in the past decade.

Fourth-quarter revenue at Hermes rose about 39% in Asia, on an adjusted basis, and shrank 9.7% in Europe.

The luxury company isn’t seeing a change in behavior coming from Chinese shoppers compared to the last three months of 2020, Chairman Axel Dumas said on a call with reporters.

The company also doesn’t plan major price increases this year, probably around 1%, similar to last year. The company typically only raises prices to reflect the increase in input costs, Dumas said.

Full-year recurring operating income fell 15% to 1.98 billion euros ($2.4 billion), topping estimates.

“Hermes confirmed its superiority to peers in 2020 with the reduction in tourist flows more than offset by a loyal customer base,” Deborah Aitken, analyst at Bloomberg Intelligence wrote in a note. Asia is showing “promise.”

©2021 Bloomberg L.P.

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