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The luxury industry may be in a slump, but consumer demand for Kelly handbags shows no signs of faltering. French luxury house Hermès reported sales up 11 per cent at constant exchange rates to €3.7 billion in the third quarter, a touch above consensus expectations of 10.5 per cent.
“We see Hermès as the best current opportunity to protect the portfolio from a difficult second half of 2024 — suffering from a global cyclical slowdown exacerbated by structural issues in China,” Bernstein luxury analyst Luca Solca wrote in a note.
Leather goods and saddlery rose 14 per cent, led by both iconic models and new models, such as the Constance Elan and the Bolide à dos bags, with a marked saddler spirit, according to the company. Ready-to-wear and accessories rose 13.5 per cent, perfume and beauty by 10.6 per cent. The house also noted that the launch of its new women’s perfume, Barénia, was successful.
Other business lines (including jewellery and homeware) increased by 13.6 per cent. Silk and textiles were up 4 per cent.
The watches category was the exception, decreasing by 18.2 per cent and largely missing consensus expectations. Hermès cited “a high comparison base due to exclusive [client] events in the third quarter last year”, according to the earnings statement.
Growth was led by Europe (up 17.4 per cent) despite “a slight slowdown in traffic in the Parisian stores due to the Olympic Games”, the Americas (13.4 per cent) and Japan (22.8 per cent), while Asia-Pacific excluding Japan was up 1 per cent, hampered by the downturn in traffic across Greater China.
The lower traffic was offset by the increase of the average basket, notably in China and Europe, Éric du Halgouët, Hermès executive VP of finance, told analysts on Thursday morning. The finance chief also said that the trend seen in the third quarter (up 11 per cent) continued in October.
“While leather goods volumes are capped at 7 per cent per annum, risks of normalising growth in non-leather categories, particularly ready-to-wear, watches and jewellery, could materialise,” Thomas Chauvet, head of luxury goods equity research at Citi, wrote in a note. “However, pricing (up 7 per cent in 2023, up 9 per cent in 2024 and with an estimated 5 per cent increase for next year) should limit downside risks to 2025 revenues.”
Chauvet called Hermès’s earnings “likely the strongest performance this quarter alongside Prada (due 30 October)”. Meanwhile, other luxury peers are facing a slowdown. LVMH’s fashion and leather goods division reported a sales decrease of 5 per cent in Q3, Kering posted sales down 16 per cent, Ferragamo reported sales down 7.2 per cent, and Ermenegildo Zegna Group said sales had dropped 7.8 per cent. Moncler is to report its earnings on 29 October and Richemont on 8 November.
“In a more uncertain economic and geopolitical context, I want to thank all employees for the robust third-quarter performance, and our customers for their loyalty,” Axel Dumas, executive chairman of Hermès, said in a statement. “Thanks to the singularity of its model, Hermès is continuing its recruitment and long-term investments.”
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