Hermès Sales Surge 28%, Defying Luxury Slowdown

Sales at Birkin bag maker Hermès accelerated in the second quarter, showing the resilience of global demand for the group’s high-end leather goods despite a clouded economic backdrop.

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

Hermès’ results come as luxury stocks have come under pressure due to uncertainty over the pace of China’s post-pandemic recovery, while a months-long spending frenzy in the US market cools amid rising inflation.

Lacklustre economic figures for China and more cautious outlooks from Cartier-owner Richemont and industry bellwether LVMH have pushed down shares of luxury companies down in recent days.

But Hermès, which targets wealthier consumers with handbags like the coveted $10,000 plus Birkin model, and is known for weathering economic turbulence better than rivals, saw strong growth across regions.

“We’ve seen no interruption in [growth] trends,” Hermès executive chairman Axel Dumas told journalists.

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

Recurring operating income for the first half was €2.96 billion, up 28 percent, while margins climbed to 44 percent, compared to 42 percent in the first half of last year. “Strong print across the board,” said Exane BNP Paribas, citing fast sales growth and consensus-beating margins.

Analysts said the results showed the strength of Hermès’ business model, which entails careful management of production and stocks.

“The power of the Hermès brand is unquestionable, long waiting lists smooth out any short-term demand hiccup,” said Bernstein.

Hermès shares traded up 3.3 percent in early morning trading, while rival Kering was up 1 percent and LVMH was down 0.5 percent.

By Mimosa Spencer; Editors: Silvia Aloisi and Sharon Singleton