Topline
Hermès—the coveted Birkin and Kelly bag maker—reported a 17% jump in first-quarter sales Thursday on the back of strong leather goods sales and Chinese demand, bucking the global luxury slowdown.
The French luxury house posted strong quarterly sales growth across all geographic areas, including … [+] China.© 2024 Bloomberg Finance LP

Key Facts

First-quarter revenue rose 17% from the previous year to $4.1 billion (€3.8 billion), with all geographical areas posting double-digit growth, topping FactSet’s consensus estimates of a 13% growth and $4 billion sales (Thursday’s report did not include earnings figures).

The leather goods and saddlery division—where the group derives more than 40% of its revenue—saw a 20% jump in sales on the back of new models, followed by a 16% growth in ready-to-wear and Accessories, its second-largest line; both beat consensus estimates gathered by FactSet.

Sales in Asia-Pacific, excluding Japan—which account for more than half the group’s revenue—grew by 14%, defying China’s slowdown that has vexed other luxury peers; Japan and the Americas also saw robust sales increases, at 25% and 12% respectively.

In contrast to Hermès’ performance, the group’s two biggest French conglomerate rivals are facing challenges: LVMH reported a modest 3% increase in first-quarter sales, while Gucci owner Kering posted a 40 to 45% profit plunge.

Hermès shares fell 4.7% in Paris afternoon trading but are up 16.3% year-to-date, beating its rivals LVMH (4.5%) and Kering (-19.1%).

Forbes Valuation
Forbes ranks Nicolas Puech, the fifth-generation descendant of Hermès founder Thierry Hermès, as the world’s 126th richest person with an estimated net worth of $14.9 billion. Puech resigned from Hermès’ supervisory board in 2014 but still owns about 5% of the company.
Key Background
The recent economic woes in China—the world’s second-largest luxury market—have struck a blow to major players like LVMH and Kering. However, Hermès has managed to weather the storm—and outperform its competitors—amid an increasingly polarized Chinese market. While economic pressures have dampened the spending of aspirational consumers—previously the main supporters of the middle-positioned Gucci—Hermès’ ultra-wealthy clientele remains undeterred in their demand for its exclusive products. Barclays analysts noted that in a polarized market, the leaders will be those with “a higher exposure to high-end consumers” or “a higher level of pricing power”—criteria that Hermès, the Birkin maker, clearly meets.

Tangent
Hermès’ exclusive strategy targeting the affluent has cemented its status among the high-end brands. But it has also landed the group in legal trouble, when two Californians filed a class action antitrust lawsuit in March. They accuse Hermès of allowing only customers with “sufficient purchase history of ancillary products” to buy the iconic Birkins—which are not on store displays and can only be viewed in private showings. Amid these controversies, the group plans to raise its prices by 8%-9% this year.
Crucial Quote
Bernstein analyst Luca Solca notes Hermès seems to have embraced Ferrari’s philosophy of scarcity as “core strategic tenet,” and that it “benefits from the ability to increase prices” when others rather “suffer a consumer spend swing back.”

Big Number
$513,000 (HK$ 4 million). That’s the all-time high price for a Birkin bag—the Himalaya Niloticus Crocodile Kelly adorned with 18k white gold and diamonds, sold at Christie’s in 2021—making it the world’s most valuable handbag ever auctioned. This figure excludes the few bejeweled limited-edition Birkin bags which were priced at around $ 2 million. Secondary market prices of Birkin sometimes far exceed—even double—their retail prices. According to Solca, this “significant premium” reflects the intense demand for “an immediately available” Birkin or Kelly bag, which are notoriously hard to get—it’s not as simple as walking into a store and picking one from a display.

Further ReadingThe Business of FashionWho Gets to Buy a Birkin Bag?FtHermès sales and China demand defy luxury slowdownMORE FROM FORBESGucci Sales Drop 18% In Q1 Amid China’s Slowdown And Demand For ‘Quiet Luxury’By Hyunsoo Rim

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