Hermes emerges as the outlier with strong China sales, while the rest of luxury bleeds from the lack of shoppers

Hermes saw Chinese buyers snap up its luxury products as the Kelly bag maker showed its resilience amid a broader slowdown in demand for the sector.

Sales at constant exchange rates jumped 17% to €3.8 billion ($4.1 billion) in the first quarter, Hermes International SCA said Thursday. This was more than analysts expected.

The shares rose as much as 1.3% in Paris before reversing those gains as investors saw signs that Hermes might not be immune to the slowdown seen by rivals. The stock is still up by more than a fifth this year, beating LVMH Moet Hennessy Louis Vuitton SE and Gucci owner Kering SA.

Hermes typically caters to the most affluent customers which makes it more resilient in a challenging luxury goods market. Its fortunes contrast with the challenges at Kering, which is seeking to turn around its biggest brand Gucci — efforts that are taking time to bear fruit.

Hermes’ revenue in its key Asia Pacific market, excluding Japan, jumped 14% to €1.92 billion in the period, while its crucial leather goods and saddlery division grew by 20%, both better than estimates.

Hermes saw softer traffic in Greater China in March after the Chinese New Year with a “slight erosion” of customers buying more affordable products such as its silk scarves. But that was compensated by shoppers splurging on its more expensive leather, ready-to-wear and jewelry goods, Chief Financial Officer Eric du Halgouet told reporters on a call.

Hermes’ perfume and beauty and silk divisions grew by 4.3% and 7.9% respectively during the quarter.

The slowdown in sales of more affordable products, such as perfumes, is being taken by some investors as a sign that Hermes may yet suffer from pressure on the middle-income consumer globally, Morgan Stanley analyst Edouard Aubin wrote in a note.

Source link

About The Author

Scroll to Top