Dive Brief:
- Hermès defied wider luxury industry trends as it reported a Q3 consolidated revenue increase of 10% year over year to 3.7 billion euros, or about $4 billion, in a Thursday release.
- Overall sales improved across all regions, although Asia-Pacific, excluding Japan, saw a slowdown for the third quarter, with year-over-year growth of 0.6% versus a 4.4% growth in the region for Q2.
- By sector, revenue grew for every division except watches, one of the company's smallest divisions, which dropped 18.9% to 126 million euros for the quarter. By contrast, its largest division, leather goods and saddlery, grew 12.7% to 1.6 billion in the third quarter.
Dive Insight:
The earnings slowdown seen by luxury firms including LVMH, Zegna, Ferragamo and Kering has not impacted Hermès, which “relies more heavily on its VIP clients” than many other luxury brands due to the exclusivity of its leather goods, said Yanmei Tang, an analyst at research firm Third Bridge.
“Each Hermès store has the freedom to choose its own inventory, making each location unique,” Tang said in emailed comments. “This personalized approach creates a one-of-a-kind shopping experience, keeping VIP clients loyal and engaged with the brand.”
Axel Dumas, executive chairman of Hermès, acknowledged customers’ brand allegiance as a factor in the company’s strong quarterly showing.
“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,” Dumas said in a statement. “Thanks to the singularity of its model, Hermès is continuing its recruitments and long-term investments.”
For the nine months ending Sept. 30, the company’s revenue was up 11% to 11.2 billion euros, with solid growth reported across all geographical regions.
During that nine-month period, Asia, excluding Japan, grew 4.8%, which the company said was supported by solid sales in Korea, Singapore, Australia and Thailand. Third quarter sales for the region were impacted by a traffic downturn in China following the end of the Chinese New Year and a high year-over-year comparison basis versus 2023.
Japan was up 18.5% in the third quarter, leading to an overall 12.1% year-over-year increase for the first nine months of 2024.
Growth was also steady for both the quarter and the year-to-date in the Americas, France, and Europe, excluding France, “despite a slight slowdown in traffic in the Parisian stores due to the Olympic games,” the company said.
“Customers still desire luxury products, but they are more cautious about what they buy and which brands they choose,” Tang said. “Many clients recognize that Hermès products are a good investment because their high value tends to endure over time.”
She also noted that while leather goods were a core category for the company, there was a faster increase in demand for non-leather categories, such as ready-to-wear and accessories.
“This growth is driven by fashion trends and a rise in purchases from women and younger consumers,” said Tang.
In its outlook, Hermès said that “despite the economic, geopolitical and monetary uncertainties around the world, the group confirms an ambitious goal for revenue growth at constant exchange rates.”
