Birkin handbag maker Hermes outshines rivals with big sales jump
Adds comment on change in Chinese tastes in paragraphs 14-15, details on U.S. sales in paragraph 16
By Mimosa Spencer
PARIS, July 25 (Reuters) -Birkin-bag maker Hermes HRMS.PA reported a 13% rise in second-quarter sales on Thursday, demonstrating the continued appetite from wealthy shoppers for its luxury handbags, even as less affluent consumers pull back.
The French group's results stand out after a string of disappointing earnings updates from rivals - including Kering PRTP.PA and LVMH LVMH.PA - which have raised investor concern about uncertain prospects for the sector in the coming months.
Hermes' famously classic designs and tight management of production and stock have helped reinforce the label's aura of exclusivity and made the company one of the most consistent performers in the industry.
CEO Axel Dumas told reporters the company had seen "no big interruption in trends".
"Iconic categories like leather goods continue to drive growth," said Luca Solca, analyst at Bernstein, referring to the 17.9% growth in the company's largest division, leather goods.
But Dumas said Hermes was seeing slightly less traffic with aspirational clients, which was impacting higher volume products like fashion accessories, including silk scarves.
That pushed sales in the group's smaller silk and textiles division down 5.6% during the quarter.
Total sales at the French luxury group grew to 3.7 billion euros ($4.02 billion), a 13% organic sales increase that strips out currency fluctuations. The figure was in line with analyst expectations, according to a Visible Alpha consensus.
Operating profit for the first half was 3.1 billion euros, compared with a forecast from consensus provider Visible Alpha for 3.2 billion.
Sales in Asia Pacific, excluding Japan, grew 5.5% during the quarter, while Japan jumped 19.5%, it said.
European luxury brands are benefiting from a surge of luxury sales in Japan, where tourists -- especially Chinese -- are taking advantage of the weak yen.
In China, a property crisis and job insecurity are weighing on the economy, which has hit demand for luxury goods after the country's post-pandemic lockdown bounce tapered off a year ago.
Dumas said that the company's Chinese clientele continued to purchase at home, and unlike peers, business in Japan was mainly driven by locals, not tourists.
He added that Chinese clients are currently looking for high-quality products, "not necessarily with logos", a change that will benefit the group.
Consultancy Bain said last month that a preference for more discreet fashion was emerging in China as the country's rich sought to avoid flaunting their wealth at a time of economic austerity.
Dumas also pointed to a dynamic U.S. market, describing it as a "great surprise". Sales in the Americas jumped 13% year-on-year in the second quarter, accelerating from growth of 11.8% in the first three months.
Hermes shares have risen nearly 6% since the start of the year, bucking a broader trend across the sector.
LVMH shares have lost nearly 10%, while Gucci-owner Kering has lost nearly 30% of its value.
LVMH earlier this week missed quarterly results expectations while Kering also undershot forecasts. Kering said worsening sales trends in June were continuing in July.
($1 = 0.9209 euros)
Shine comes off luxury stocks on China concerns https://tmsnrt.rs/3SkYQQJ
Top 10 luxury stocks have burnt over 230 bln euros from March https://tmsnrt.rs/3YgQuNG
Reporting by Mimosa Spencer. Writing by Dominique Patton
Editing by Alexandra Hudson, David Evans and Jane Merriman
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
