Hermes Rebounds In China As Margin Surges To Record Highs – Cryptovibes.com – Daily Cryptocurrency and FX News

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Birkin bag maker Hermes (HRMS.PA) saw sales grow significantly in the second quarter, boosted by rapid growth in the United States and Europe, and bouncing back quicker than rivals in China after lockdowns eased last month.

Luxury retailers were badly affected by restrictions on movement from mid-March in major Chinese cities such as Beijing and Shanghai, with most recording over 30% fall in quarterly sales in the country – a key market for the industry – earlier this week. Kering (PRTP.PA) and LVMH (LVMH.PA) remained cautious about the speed of recovery in China, the industry’s leading growth driver.

French leather goods company Hermes, which is also famous for its silk scarves with equestrian prints, was more optimistic, saying that sales had increased in percentage terms by double digits last month and kept performing well this month. The return of U.S. tourists to Europe also helped increase sales, the group said.

Overall revenues in the three months to June totaled 2.7 billion euros ($2.76 billion), a stronger-than-anticipated 19.5% jump at constant exchange rates, which ignores currency fluctuations.

Hermes also exceeded market forecasts by growing operating margins to a record 42% in the first half of 2022, the largest level in the industry and a significant achievement given that Hermes has in recent months hiked prices less than rivals such as Chanel and LVMH.

The profit margin will decline in the second half of 2022, however, as the company boosts investments in advertising and e-commerce after events were restricted in China during the COVID restrictions. Hermes is also increasing salaries in Europe, executives told analysts in a conference call.

The group does not intend to further hike prices this year above an average of 4% already implemented to counteract growing costs of precious metals and raw materials.

Luxury goods consumers have so far been ignoring the increasing costs of living and concerns about an approaching recession, but industry executives have all accepted that the outlook for the remaining of 2022 is uncertain.

Hermes, traditionally considered to be very immune to downturns, has long been one of the most consistent performers in the luxury goods industry, in part because of its careful management of production stocks and production, which have helped preserve its aura of exclusivity.

Its fancied $10,000 plus Birkin handbags tend to prompt waiting lists, and can sometimes lift in resale value, increasing their appeal as a luxury purchase more resistant to fashion trends and economic crises than other products.

Luca Solca, a luxury analyst at Bernstein, stated:

“This set of results confirms that Hermes is likely going to be the most resilient luxury goods player in a recession and an appropriate hiding place for those seeking cover.”

($1 = 0.9793 euros)



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