(Bloomberg) — Hermes International’s revenue more than doubled, surpassing pre-pandemic levels, as the Birkin handbag maker kept luring shoppers to splurge on dresses and fashion.
Revenue rose 127% at constant exchange rates in the second quarter, beating analysts’ estimates, and was 33% higher than in the same period in 2019, Hermes said Friday. Leather goods and ready-to-wear contributed to the strong performance.
Quarterly sales surpassed 2019 levels for the company everywhere except in France, where spending largely depends on tourists. The strong performance follows Louis Vuitton owner LVMH, which earlier this week posted a 40% gain from 2019 for its key fashion and leather goods unit for the period. Shoppers worldwide have been splurging on luxury handbags, jewelry, and fashion after accumulating savings during last year’s strict lockdowns.
Sales in the Americas led by the U.S. quintupled and were the most buoyant for Hermes. Loyal customers returned in that market, and Hermes attracted new ones via online shopping, some of whom are now coming to stores, Executive Chairman Axel Dumas said during a call with reporters Friday.
Hermes is one of the most exclusive publicly traded luxury brands because of output constraints. The limited supply of goods from silk scarves to leather handbags has helped the French brand’s mystique and pricing power. Business was particularly challenged last year because production sites in France had to shut down for four weeks in March and April.
“Production at Hermes isn’t calibrated for revenue, but it’s calibrated for the best product,” Dumas said during the call. “The quality level is artisanal and not industrial.”
Still, Hermes remains “ambitious” when it comes to production capacity after it recruited close to 400 employees in the first six months, he added. The strong demand for its leather and saddlery goods in the first half could be met thanks to the availability of product stocks that hadn’t sold at the end of last year due to store closures. That’s unlikely to be replicated in the second half, Dumas warned.
What Bloomberg Intelligence Says
“Hermes’ superior brand strength saw it exit the pandemic slowdown ahead of all peers and with major margin uplift. New stores and refurbishments, as well as e-commerce rollouts to more countries, are driving revenue and advancing profit at an unprecedented pace, with a U.S. recovery supporting brand equity.”
–Deborah Aitken, BI luxury analyst
The shares rose as much as 1.9% Friday, having gained 84% in the past year, giving the company a market value of 138 billion euros ($164 billion).
Hermes’s quarterly revenue from its watch unit rose 151%, partly helped by the release in April of a $5,700 men’s watch called H08 featuring a sporty design.
Recurring operating income more than tripled to 1.72 billion euros ($2 billion) compared to the 1.45 billion euros analysts expected. Recurring operating margin widened to 41% from 22% last year, a performance Sanford C. Bernstein analyst Luca Solca called “stellar.”
Hermes Finance Director Eric du Halgouet said that margin level cannot be extrapolated to the second half as the company plans to boost spending, notably in communications and recruitment.
This first-half earnings season has shown the luxury industry is recovering strongly from the worst of the last year’s lockdowns. Prada on Thursday said profit exceeded 2019 levels, sending shares to a seven year-high. That followed strong performances from Gucci owner Kering SA as well as LVMH earlier this week.
(Updates with Bloomberg Intelligence, management comments throughout)
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