Hermès Rides High In Q1 Thanks To Asia

    Watches and jewelry made the biggest gains for Hermès, though all the categories at this esteemed French luxury house grew in high double digits.
    Watches and jewelry made the biggest gains for Hermès, though all the categories at this esteemed French luxury house grew in high double digits. Photo: Shutterstock
    Kevin RozarioAuthor
      Published   in Finance

    Sales at Hermès surged past 1.43 billion over the three months ending in March, driven by what the luxury label called “an outstanding performance in Asia and Japan.” That helped offset declines in Europe, where pandemic restrictions and the loss of international tourists continue to bite.

    At constant exchange rates, Asia (excluding Japan) grew 94 percent, fueled by “highly dynamic activity in Greater China," thanks to events such as Fast Forward Men, organized in Shanghai in March. Last year, the region accounted for 46 percent of total revenue. But this quarter, that share climbed sharply to 54 percent.

    Conversely, Europe’s 4.4-percent contraction during this period reduced its influence. From a sales share of 25 percent in 2020, it fell to just 18.3 percent, while the Americas, which returned to growth in the three months to March, held steady at 14 percent.

    Total first-quarter revenue hit 1.49 billion, up by 44 percent at constant exchange rates and +38 percent at current rates. Sales growth in the group’s stores, where the latest unit opened last week in Galaxy Macau, was even better at 51 percent, compared to 2020, and up 41 percent versus the first quarter of 2019. However, the brand's wholesale activity took a 2-percent hit due to the negative impact of travel retail.

    Hermès’ Q1 growth compares very favorably with luxury leaders Kering and LVMH, which recorded jumps at constant exchange rates of 26 percent and 30 percent, respectively, over the period.

    The numbers did not disappoint investors, with shares rising by 2.5 percent in trading on Thursday morning. In a statement, Axel Dumas, executive chairman of Hermès, said, “In a still unstable context, our strong growth confirms the robustness of our sustainable artisanal model and the desirability of our collections.”

    All business is back in growth mode#

    Every one of the French house’s product segments saw double-digit growth, led by watches where sales almost doubled. The mainstay leather goods and saddlery division was up 34 percent, generating sales just under 706 million, while the second-biggest division, ready-to-wear/accessories, grew by 51% percent.

    Strong deliveries from the end of last year were one reason for the large uptick. As an expert storyteller, Hermès (ranked sixth on Jing Daily’s China Global Luxury Index) has also increased its French production capacity by opening sites in Guyenne and Montereau this year, underscoring its craft credentials. More facilities are scheduled for Louviers in 2022, Ardennes in 2023, and another production site in Auvergne in 2024.

    Hermès has dubbed 2021 the year of The Odyssey, exploring the house’s journey along a road of uncertainties as the pandemic continues to rage on.

    Looking ahead, the company should rely even more on its highly integrated craftsmanship model as a differentiator that will help it retain customer loyalty. However, the house did not provide any forecasts except to say it had “an ambitious goal for revenue growth.”

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