Hermès First-Half Results Are Grim, Except For Online Sales In China

    The maker of the iconic Birkin bag, Hermès, is feeling the brunt of the pandemic, as its sales plunged by 42 percent over the second quarter.
    The maker of the iconic Birkin bag, Hermès.  Photo: Shutterstock
    Emily JensenAuthor
      Published   in Finance

    On July 30, the french luxury group Hermès revealed its first-half earnings results for 2020, ending on June 30, and net profits plunged by 55 percent to $395 million (335 million euros) from $889 million (754 million euros) over the first half of 2019. Meanwhile, revenue dropped 24 percent to $2.9 billion (2.49 billion euros) from $3.87 billion (3.28 billion euros). Sales also plunged — 42 percent over the three months through June. Hermès said in a statement that it would be difficult to assess the impact of the pandemic over the full year, but it hopes to grow revenue at constant exchange rates in the medium term.

    Hermès executive chairman Axel Dumas added that it would also be impossible to predict when foreign tourists, who during the summer months traditionally contribute 70 percent of European sales to luxury groups, would resume traveling and spending. "This unprecedented crisis, which began at the start of the year and is still ongoing, allows us to test our business model's strength," said Dumas.

    The silver lining lies in Hermès’ online channels, where sales have grown by double-digits across Asia. Online sales in the first half increased by more than 100 percent in China, and that growth continued even after stores reopened in the country. One fun fact the company disclosed during the call was about a new online sale. A first-time buyer purchased an Hermès couch online during the first half of the year (prices start at $35,500 for a Matieres reception sofa and reach as high as $99,200 for its Sofa Sellier 5-seater corner.)

    On a positive note, Hermès said it had hired 250 new employees over the first half of the year, mostly in production, and that it kept investing in the expansion of its leather goods manufacturing in France, albeit with slight price increases on those products.

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