What happened
Hermès is bucking concerns of a spending slowdown and demonstrating why it’s “in a league of its own,” as analysts describe.
On February 9, the French luxury group reported record annual revenue of 13.4 billion euros ($14 billion), up 21 percent at constant exchange rates from last year, along with record net profit of 4.3 billion euros ($4.6 billion), up 28 percent. In the fourth quarter, sales increased 18 percent to 3.3 billion euros ($3.5 billion).
These results were fueled by robust performance across all regions. In the 12 months ended December 31, Asia, excluding Japan, grew by 19 percent from last year. Notable milestones included a second store opening in Chengdu in October, marking the brand’s 33rd address in mainland China. After the reporting period, another store was unveiled in Wuxi, Jiangsu province, pointing to the luxury giant’s strong retail growth in the country.
Ralph Lauren is also benefiting from sustained luxury appetite in China. While all regions were up, sales in China surged by more than 30 percent in constant currency terms in the holiday quarter, boosted by a Singles’ Day livestream, a pop-up in Shanghai, as well as a limited edition Polo ID handbag collaboration with Chinese KOL Mr. Bags, which sold out within a minute on WeChat.
The Jing Take
After disappointing Gucci earnings last week, Hermès is proving that the world’s wealthiest consumers aren’t deterred by inflationary pressures and rising prices. In fact, executive chairman Axel Dumas said the company plans to raise global prices by 8–9 percent this year, following a 7 percent increase last year attributed to higher production costs.
A consistently strong performer in the luxury goods sector, Hermès excels by carefully managing its production and stock, as well as prioritizing existing clients over acquiring new ones. Through exclusivity and scarcity, it has managed to evade the global post-pandemic cooldown for high-end goods affecting its rivals.
Even LVMH, which just celebrated a record year, has slowed to single-digit revenue growth, whereas the Birkin bag maker is still growing in the double digits.
“What is specific with Hermès compared to other players is that we invest a lot in client events and much less in press and media events,” Dumas said on an earnings call, dubbed over by a translator. “We do the opposite of what other players in the industry do. Our main communication channel is the client or customer event…We don’t have a lot of money and press to drive up our revenue, unlike others.”
“We do the opposite of what other players in the industry do. Our main communication channel is the client or customer event.”
In the case of Ralph Lauren, sales were up on the performance of iconic core products such as Oxford shirts, mesh polos, cashmere sweaters, and blazers, which represent 70 percent of the business. This aligns with current fashion trends in China, where quiet luxury, old money (老钱风), and clean fit aesthetics continue to dominate social media.
“Ralph Lauren is really a brand that embodies the ‘old money style’ vividly,” writes Xiaohongshu user Junjie’s Wool Circle @君洁的羊毛圈. “The Ralph Lauren 2023 spring and summer series covers almost all American retro styles, which are naturally low-key yet high-end. Elegantly relaxed and exquisitely casual, the collection perfectly captures the tone of the old money style.”
Patrice Louvet, CEO of Ralph Lauren, said on the investors call that the brand is “still in the earlier stages of brand building in China, with meaningful outperformance versus peers in the quarter on consumer KPIs, including brand awareness, consideration and Net Promoter Scores.”
In addition to its Singles’ Day activations, which led to a 25 percent increase in sales on ralphlauren.cn compared to last year, Louvet noted that its Douyin performance has also been “very encouraging” since its limited launch last fall.
These results from Hermès and Ralph Lauren point to the strength of classic items and underscore the importance of investing in growth opportunities in China. In a world flooded with marketing noise and gimmicky trends, it seems those with the quietest styles are celebrating the loudest.
The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.