Hermès defies China slowdown with strong Q4

French luxury house Hermès today posted better-than-expected fourth-quarter sales growth of 17.6% at constant exchange rates to 3.96 billion euros ($4.15 billion), capping off a strong year that saw full-year revenue rise 14.7% YoY to 15.2 billion euros ($15.9 billion) as the maker of Birkin bags demonstrated remarkable resilience in China’s challenging luxury market. While growth was robust globally, with double-digit revenue increases across most regions, Asia-Pacific (excluding Japan) emerged as the slowest-growing market with an 8.9% YoY rise in the fourth quarter. Despite being the laggard among regions, this performance still outpaced analyst expectations. Hermès’ results stand in sharp contrast to luxury sector rivals, which have struggled in the Chinese market. LVMH reported a 2% YoY decline in full-year 2024 sales, while Kering has been buffeted by significant headwinds in the region. After reporting Q4 results, Hermès' stock gained 4.9%, underscoring the company's unique position in the luxury goods market and its inclusion in the KraneShares Global Luxury Index ETF (KLXY), which serves as a benchmark for global luxury stock performance. Leather goods lead growth The leather goods and saddlery division, which accounts for nearly half of Hermès’ revenues, proved particularly strong with 21.7% growth in the fourth quarter, showcasing the enduring appeal of its most exclusive products among wealthy Chinese consumers. Executive Chairman Axel Dumas acknowledged the broader market challenges while highlighting the company’s resilience. “In 2024, in a more uncertain economic and geopolitical context, the solid performance of the results attests to the strength of the Hermès model,” he said in a statement. However, Dumas cautioned during an earnings call that it was “too early” to call a recovery in the wider luxury industry, despite some positive indicators. Maintaining brand exclusivity The results suggest Hermès’ strategy of maintaining strict control over production and distribution of its most coveted items continues to resonate with affluent Chinese consumers, even as the broader luxury market faces headwinds from the country’s property crisis and economic uncertainty. Looking ahead, the French luxury house forecast continued revenue growth in 2025 without providing specific targets, expressing confidence in its business model despite ongoing market volatility.

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Hermès defies China slowdown with strong Q4