Asia Drives An Hermès Rebound In Q3

On October 22, the French luxury group Hermès revealed its earnings for the third quarter. The group returned to growth as consumers regained their appetites for products like Birkin bags after lockdowns ended earlier in the year. Revenue rose by 6.9 percent on an adjusted basis to $2.1 billion (1.8 billion euros) in the quarter, beating estimates by $118.5 million (100 million euros). Hermès shares rose as much as 1.4 percent in Paris and traded near their record, gaining by over 20 percent this year.

Asia has been the main driving force behind the rebound, with “remarkable performances” across Mainland China, Korea, Australia, Thailand, and Singapore that generated a combined sales increase of 29 percent. Yet, the North American and European markets continue to suffer from the ongoing COVID-19 pandemic and its effects.

“In 2020, we are seeing the affirmation of major strategic commitments with social and environmental responsibility, the digitalization of uses and lifestyles, as well as positive market dynamics in Asia,” noted Axel Dumas, executive chairman of Hermès.

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Pent-up demand helped Hermes post-lockdown, since, in the first half of the year, consumers had recourse aside from acquiring the company’s iconic handbags and silk scarves via e-commerce. Hermes’ online shop now drives more revenue than its flagship store Faubourg Saint-Honore in Paris, according to the brand’s chief financial officer, Eric du Halgouet, to reporters on a call. “There’s no cannibalization” between online and physical stores, he added, saying that 85 percent of online transactions are coming from new clients.

As for the performance of its various business lines, most of them managed to rally from a harsh second quarter, but they still left the third quarter in the red. Leather goods and saddlery rebounded with an eight percent growth, which left it at a 13-percent decline at quarter’s end. Meanwhile, the group’s ready-to-wear and accessories department reported a 16-percent drop in sales despite a seven-percent rebound over the quarter. Perfumes have been hit the hardest due to the lack of travel retail activity, absorbing a 22-percent decrease.


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