Hermès sales rose 28%, defying slowing luxury prices

Sales at Birkin bag maker Hermes accelerated in the second quarter, showing the resilience of global demand for the group’s luxury leather goods despite the murky economic backdrop.

Group sales for the three months to the end of June reached 3.32 billion euros ($3.65 billion), up 27.5 percent at constant exchange rates, above the visible Alpha consensus for a gain of 22 percent, with double-digit growth across all regions.

The Hermes results come as luxury stocks have been pressured by uncertainty about the pace of China’s post-pandemic recovery, while a months-old spending frenzy in the US market is cooling amid rising inflation.

China’s lackluster economic numbers and a more cautious outlook from Cartier owner Richemont and industry leader LVMH have sent luxury stocks lower in recent days.

But Hermes, which targets affluent consumers with handbags like the $10,000 Birkin as well as the Birkin that’s known for weathering economic turmoil better than competitors, has seen strong growth across regions.

“We haven’t seen any break in (growth) trends,” Hermes CEO Axel Dumas told reporters.

Dumas added, “In difficult times, there is what you call a journey to quality and we have benefited from it.”

Recurring operating income for the first half was 2.96 billion euros, up 28 percent, while margins rose to 44 percent, compared to 42 percent in the first half of last year. “Strong print across the board,” said Exane BNP Paribas, citing rapid sales growth and profit margins that beat consensus.

Analysts said the results demonstrated the strength of Hermes’ business model, which entails careful management of production and inventories.

“The strength of the Hermès brand is indisputable, and long waiting lists mitigate any short-term demand whirlwind,” said Bernstein.

Hermes shares were trading up 3.3 percent in early morning trade, while rival Kering Co rose 1 percent and LVMH fell 0.5 percent.

Written by Mimosa Spencer; Editors: Sylvia Aloisi and Sharon Singleton

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