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Hermès continues to outperform its competitors. On Friday morning, the French luxury house announced sales were up in the fourth quarter of 2023 by 17.5 per cent year-on-year, at constant exchange rates to €3.36 billion. For the full year, Hermès sales were up 21 per cent to €13.4 billion.
“Hermès confirms its strong brand momentum, with a solid beat to sell, side consensus expectations for the fourth quarter of 2023: producing 17.5 per cent against 13.7 per cent,” says Luca Solca, senior analyst at consultancy Bernstein. Growth in the quarter was driven by the Americas (up 21.6 per cent), Europe (up 18.6 per cent) while Asia Pacific was up 14.8 per cent. “Hermès is yet another company to confirm reviving momentum of the American consumers on the back of resurgent confidence and lower inflation,” Solca noted.
LVMH posted a 9 per cent growth for its fashion and leather goods division in the fourth quarter, while Kering sales in the same period fell by 4 per cent. Hermès’s beat sent the stock up 4.9 per cent in morning trading.
Axel Dumas, Hermès executive chairman, told analysts and reporters on Friday during a conference held at Hermès’s Rue de Sèvres flagship in Paris: “We have seen in 2023 a polarisation of the industry between those who did very well and those who did less well. What you call normalisation is a reality check. I am confident in the group, in our clients. I see in my teams, a general optimism… But I never believe it’s won in advance. We’re a business of desire. With each collection, [we have to think], is it going to appeal [to our clients]?”
Fourth-quarter key growth drivers were ready-to-wear and accessories (up 27.5 per cent), and Other Hermès product lines, which include jewellery and homeware (up 24.4 per cent), perfumes and beauty (up 22.2 per cent), watches (22 per cent) and leather goods (10.4 per cent). “Importantly leather goods is ahead and in the double digits in the quarter, defying the usual end of year lull on the back of satiated store managers having met targets long before,” Solca noted.
The perfumes and beauty category sparkled in Q4 for Hermès too, while Estée Lauder Companies posted sluggish sales and L’Oréal missed expectations. “I have great expectations for makeup and I’d like us to enter skincare at some point,” Dumas said. (Hermès, which has long had a fragrances division, launched its cosmetics business in 2020.)
Hermès increased its prices this January and February by 8 to 9 per cent across categories, following a 7 per cent increase in 2023, to reflect inflation and adverse currency effects. In that sense, Hermès is at odds with its peers, who strongly raised their prices following the Covid pandemic. “The pricing policy was put together by my mother in the 1980s: our prices are based on manufacturing costs,” Dumas said. “Our prices are accepted and respected because they are not made with desirability in mind. Our policy is virtuous because it’s authentic.”
With Chinese New Year taking place at a later point this year compared to last, it’s hard to gauge the trends, says Dumas.
“We expect upgrades to consensus 2024 sales of €14.73 billion,” said Thomas Chauvet, head of luxury goods equity research at Citi. “With continued brand heat in both handbags and non-leather categories (in particular ready-to-wear, watches and jewellery), supply and demand imbalances and the 8 to 9 per cent price [rises] implemented in January, Hermès is well positioned in 2024.”
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