PARIS – Building on past concerns about an uneven return in global luxury demand, Hermès announced that first-quarter sales jumped 44%, at constant rates, beating expectations and fueling optimism from industry leaders. sector.
“This is a confirmation of a vibrant luxury goods demand environment around the world and a V-shaped exit from the COVID-19 pandemic,” said Luca Solca and Maria Meita de Bernstein in a research note.
Following recent reports from luxury peers LVMH Moët Hennessy Louis Vuitton and Kering, as well as a slight increase in Swiss watch exports in March, the numbers add further evidence that the luxury sector is on the rise.
“Louis Vuitton, Dior and Hermès had a phenomenal quarter,” said Mario Ortelli, managing partner of Ortelli & Co., a luxury mergers and acquisitions firm, predicting that these numbers would prompt investors to increase their expectations for the year.
The bases for comparison are easier right now, as Asia has taken the brunt of the coronavirus crisis this season last year. But even if the second and third quarters bring more difficult comparisons in Asia, they will become less difficult in Europe and the Americas where activity declined at a later stage last year, noted Ortelli, recalling how the pandemic has scanned regions at different times.
Noting how the crisis has served to accelerate trends, Ortelli warned that the top performing labels were about to broaden their lead.
“The performance gap between the best performing brands, the hottest brands and the rest will continue to grow over time: winners take it all,” he said.
The rise of digital and the importance of sustainability are also key trends, he added, noting that consumers would look to buy less but buy better.
“Instead of buying 10 t-shirts, because I have fewer opportunities to wear them, I buy two that are memorable,” he said.
Famous for the durability of its ever popular Birkin bags, which bring in significant sums in secondary markets, Hermès’ performance in the first quarter was driven by a good performance in China and a good performance in the Americas region.
“In a still unstable context, our strong sales growth confirms the robustness of our sustainable artisanal model and the desirability of our collections with our customers around the world,” said Axel Dumas, Chairman and CEO of Hermès.
Revenues amounted to 2.08 billion euros, up 38.4% from the previous year, or 32.8% from the first quarter of 2019 – compared to the figures before the pandemic – driven by a solid performance in its ready-to-wear business. . This division, which includes men’s and women’s clothing as well as accessories like shoes and belts, grew 50.9% at constant rates, while its largest division, leather goods and saddlery, including bags hand, increased by 33.6%. Watches, which performed strongly last year, rose 96.5%, while silk and textiles rose 33.9%.
At constant rates, the company grew 74.3% in Asia, with activity in China that the company described as “very dynamic”, while activity was “sustained” in South Korea, Thailand, Singapore and Australia. In Europe, sales fell 4.4% due to the lack of international visitors, as well as ongoing coronavirus lockdowns. The company grew 22.6% in the Americas, marking a recovery in business there.
Hermès is strengthening its network of directly-owned stores, which posted growth of 41% compared to 2019 figures, while digital sales increased and activity in wholesale channels, down 2%, suffered from the lack of international travel.
While the impacts of the coronavirus pandemic evolve on a daily basis and are difficult to assess, the company cited its integrated craft model, its balanced distribution network and the loyalty of its customers as reasons for confidence in the future.
The company continues to increase its leather goods production capacity, with the opening of new sites in Guyenne and Montereau in France this year.
The group has maintained its “ambitious objective of growth in turnover” in the medium term, despite the economic, geopolitical and monetary uncertainties.
LVMH last week announced a 30% increase in organic sales in the first quarter, while Kering’s revenue rebounded above pre-pandemic levels as its flagship label Gucci recorded organic growth by 24.6%.
Swiss watch exports in March rose 37.2% to 1.9 billion Swiss francs, or $ 2.07 billion, from the previous year, when exports fell 21.7% as coronavirus lockdowns swept the market, according to the Federation of the Swiss Watch Industry. Compared with March 2019, however, exports increased 7.4%. Mainland China was the main consumer of Swiss watches during the month, easily dominating other key markets like the United States, Hong Kong, Japan, Singapore and the United Kingdom.
For this year, Bain & Co. has forecast an overall luxury goods growth of between 10% and 12%, or 17% to 19% depending on macroeconomic conditions, the evolution of COVID-19 and the speed of return of world travel, as well as the resilience and trust of local customers. The company estimates that sales of personal luxury items fell 23% in 2020, the biggest drop on record.
Hermès shares closed up 2.05%, or 21 euros more, on Thursday to close at 1,047.50 euros per share, making it the third largest company in the CAC 40 index in Paris in in terms of market capitalization, behind LVMH and L’Oréal. – and above all the drug manufacturer Sanofi.
