Hermes’s sales and profit jumped as the maker of Birkin bags stood out from its luxury-industry rivals with unabated demand for its high-end purses, notably in the US and China.
(Bloomberg) — Hermes’s sales and profit jumped as the maker of Birkin bags stood out from its luxury-industry rivals with unabated demand for its high-end purses, notably in the US and China.
First-half earnings and sales growth beat analysts’ estimates. Revenue in the Americas gained 21% in the second quarter at constant exchange rates, almost double what analysts expected. The stock rose as much as 4.3% in Paris.
Hermes is outperforming rivals LVMH Moet Hennessy Louis Vuitton SE and Cartier owner Richemont, which have reported weaker demand in the US after strong spending on luxury goods in the past two years.
Demand has stayed strong in all regions in July, Executive Chairman Axel Dumas told reporters in a call Friday, adding he’s confident for the rest of the year.
“In difficult moments, there’s what we call in finance the flight to quality, so we’ve benefited from it,” Dumas said, adding “I don’t want to jinx it.”
Recurring operating profit advanced 28% to €2.95 billion ($3.24 billion) in the first half, and the margin reached a record 44%.
Analysts consider Hermes to be in a category of its own as far as pricing power is concerned as demand for its handbags consistently surpasses its capacity to produce them. That means many bags enjoy higher resale values.
“Hermes blows the whole luxury goods industry out of the water,” wrote Luca Solca, an analyst at Bernstein.
LVMH’s US revenue fell 1% in the second quarter on an organic basis. The Americas growth at Hermes was helped by all divisions and mostly by higher volumes, Dumas said. Sales from the region that includes China also grew by a more than a third.
Dumas said historically profitability is stronger in the first half.
Hermes shares have outperformed its luxury rivals, jumping by around a third this year. The company saw its market capitalization cross the symbolic €200 billion threshold earlier this year.
Read more: At €200 Billion, Hermes Surfs Luxury Boom to Surpass Novartis
Jane Birkin, the actress who was the muse for the bag model named after her, died earlier this month.
“She was a dear friend of the maison,” Dumas said earlier, describing her as an “open-minded” artist who happened to be close to his uncle Jean-Louis Dumas who once ran the company. After bumping into her once on a flight in the 1980s, Jean-Louis took on her design idea for a bag model which then became one of the label’s most sought-after product.
The maker of Kelly bags, named after actress Grace Kelly, aims to open one new leather manufacturing facility per year in France in order to maintain a growth rate of about 7% for its leather goods.
Read more: Hermes Boosts Kelly Bag Output With New Normandy Facility
The company said it has no plans to further boost product prices this year after January’s hike.
(Updates with further comments from Axel Dumas)
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