Hermès International has continued its strong performance in the luxury goods sector, reporting steady sales growth in the third quarter, as Birkin bags continued to attract affluent consumers willing to spend lavishly.
In the financial report released on Wednesday, Hermès revealed a 9.6% increase in revenues at constant exchange rates, reaching €3.88 billion (approximately $4.52 billion), slightly surpassing analysts’ expectations of 9.3% growth. The performance in regions such as the United States was particularly robust, with quarterly income climbing 14.1%, alleviating concerns over the Trump administration's tariff policies potentially affecting consumer spending.
Eric du Halgouet, Hermès' Chief Financial Officer, stated during a conference call that the strong growth in the U.S. market spanned various product categories, with steady increases in store foot traffic. He also noted that Hermès had not raised prices in the U.S. since a one-time adjustment made in May to address tariff impacts.
This performance follows optimistic sentiments in the luxury industry after LVMH released reassuring sales data last week, suggesting that demand for luxury goods is recovering from previous lows. So far this year, Hermès stock has declined by 3.1%, aligning closely with LVMH's performance.
Scarcity Strategy Shields from Industry Challenges Hermès has proven to be one of the most resilient luxury brands, managing to maintain growth amid a global cooling in high-end goods demand and tariff concerns with its scarcity management approach. The company strictly controls product output, sustaining a growth rate of 6%-7% per year, requiring consumers to wait months at times for a bag.
This strategy insulates Hermès from the impact of typical luxury consumers who have reduced spending following the early pandemic boom years. The core business segment of leather goods and saddlery experienced a sales increase of 13.3%, including classic styles like the Birkin, Constance, and Kelly, which collectively represent nearly half of the company's annual revenue, though the growth was slightly below expectations.
Improvement in the Chinese Market During the conference call, Eric du Halgouet noted a "slight improvement" in the Greater China region in the third quarter, highlighting that real estate prices in major cities are stabilizing and that the stock market shows positive trends. Chinese consumers account for about one-third of the global luxury goods sales.
This cautiously optimistic commentary aligns with observations from other major brands, including LVMH and L'Oréal, which have also reported seeing signs of recovery. The sales report from LVMH last week ignited an $80 billion surge in its market value, leading to speculations that the industry has hit bottom in China, although analysts caution that it may be premature to declare the end of the two-year slump.
However, du Halgouet remarked that Hermès has not yet observed any trend changes in the current quarter so far. According to Visible Alpha consensus data cited by UBS, Hermès’s third-quarter sales growth is largely in line with analysts' expected increase of 10%. The company's sustainable performance has further bolstered market confidence that the dip in luxury goods demand is beginning to ease.
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