Hermès, the French luxury handbag manufacturer, recorded a 17% surge in sales to 3.805 billion euros (approximately 4.07 billion US dollars) at constant exchange rates in the first quarter of this year. This result exceeded analysts' estimates of 3.68 billion euros compiled by Visible Alpha. At current exchange rates, revenue grew by 13%.
In a phase where major European luxury brands are struggling with a decline in sales growth, the results from Hermes reflect the ongoing polarization trends in the industry. After a post-pandemic boom in the luxury sector, a slow start was expected in the year 2024. However, performance varies according to the target customer base of the companies: brands that appeal to wealthier clients seem to perform better.
In contrast to Hermes, LVMH Moet Hennessy Louis Vuitton reported a decline in quarterly revenue, while Brunello Cucinelli and Prada announced positive results. Moncler also exceeded analysts' expectations.
Hermès Achieves Double-Digit Growth in All Its Markets, Including Asia. The positive trend in this region stands in contrast to other market players like Kering, who are struggling in a stagnating Chinese economy. The slower-than-expected recovery from the pandemic in China and a decrease in Chinese tourists traveling abroad also contributed to the normalization of growth trends.
Despite growth in Asia during the quarter, Hermes noted that customer traffic in stores in Greater China was weaker after the Chinese New Year, which according to Citi analysts could be seen as a negative sign.
At the stock exchange, investors reacted disappointedly to Hermes's cautious comments on customer traffic in China. Hermes's shares fell by 4.8% to 2,240 euros. Shares of LVMH and Moncler also fell by 3%, while Brunello Cucinelli and Richemont gave up more than 2%. Salvatore Ferragamo and Hugo Boss recorded declines of more than 1%.
Bank of America analysts view Chinese demand as the biggest variable factor between the best and worst performers in the industry. Despite the challenges, Hermes remains optimistic about revenue growth at constant exchange rates in the medium term, but cautions against global economic, geopolitical, and monetary uncertainties.
