Hermes International showed it was immune to shopping disruptions in China with sales jumping in the fourth quarter as wealthy consumers’ appetite for Birkin bags and other high-end leather goods remained strong.
(Bloomberg) — Hermes International showed it was immune to shopping disruptions in China with sales jumping in the fourth quarter as wealthy consumers’ appetite for Birkin bags and other high-end leather goods remained strong.
Sales gained 23% in the three months through the end of December at constant exchange rates compared to the same period a year earlier, the French company said Friday in a statement. Analysts had expected a 17% gain.
The biggest division, leather goods and saddlery which sells the Birkin bag, grew by a quarter during the period, also surpassing estimates. The growth helped push Hermes’s sales to a record €11.6 billion ($12.3 billion) for 2022, up from €8.98 billion the previous year. Recurring operating income for the year also surpassed forecasts.
Hermes’s results came despite a blow to spending in China, where a wave of Covid kept shoppers and workers at home. Some luxury groups, such as Gucci owner Kering SA, were severely hit, whereas Hermes sales in the Asia-Pacific region excluding Japan jumped by about 25%.
“Hermes has ploughed through the Covid-19 related issues” in the quarter, Bernstein analyst Luca Solca wrote in a note. “With recent very strong share price performance, much of the good news seems to be reflected in the Hermes share price.”
Shares in Hermes have gained about 20% so far this year, and fell about 1% in early trading on Friday.
Executive Chairman Axel Dumas said he’s confident for this year after his group had a “very strong” 2022 despite various uncertainties. “Historically, the group has been resilient through crises,” he said during a call with reporters.
Read more: Kering Sales Slump on Gucci, Balenciaga Ad Controversy
The company will pay an exceptional €4,000 bonus to all employees worldwide at the end of this month, Dumas added.
Hermes, among the most exclusive luxury brands, is trying to meet soaring demand for its Birkin and Kelly bags by opening new manufacturing plants in France. Even with the expansion, customers often face long waiting lists for the products; many turn to the resale market, purchasing the bags at an even higher price.
In January, Hermes implemented 8% product price hikes in France, and an average of 7% globally, Dumas said.
Read more: Hermes Kelly Bag Fetches Record Price at Sotheby’s Auction
During the last quarter, Hermes opened a 1,881 square meter store on Madison Avenue in New York City. The brand is holding its womens’ fall-winter ready-to-wear show on March 4 in Paris during fashion week.
(Updates with analyst comment in fifth paragraph and opening shares in sixth.)
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