Hermès outclasses competitors with modest luxury

French luxury brand Hermès has significantly outperformed its competitors in the second quarter, posting a 13 % increase in sales despite the prevailing headwinds in the luxury sector.

America big surprise

Hermès performed significantly better in the past second quarter compared to other luxury houses, such as LVMH and Kering. Market leader LVMH saw barely 1 % growth, while Kering saw an 11 % sales drop in the first half of the year. These are a stark contrast to the 13 % growth, to 3.7 billion euros, at Hermès. However, operating profit did remain slightly below analyst forecasts at 3.1 billion euros.

In the Americas, sales of the Birkin handbag producer rose 13 %, another acceleration from the 11.8 % growth in the first quarter. CEO Axel Dumas even called the result a big surprise. It compensates for the slowdown in Asia, where sales excluding Japan climbed only 5.5 %. Japan did see a 19.5 % increase in sales.

Chinese hunger for discretion helps Hermès

The same trends that are pushing down other luxury houses in Asia, are helping Hermès grow. Wealthy Chinese travel and shop less, due to economic slowdown in the country and visa controls due to the Chinese government, but are increasingly focusing on discreet luxury without big logos or lots of bling. The trend that Gucci is struggling considerably with, actually helps Hermès to shine.

Dumas does note the drop in sales volume of small accessories with traditionally higher volumes, such as the brand’s silk scarves. Those tend to be bought by so-called aspirational shoppers: consumers who are less affluent, but want to work their way up that way. However, it is that group that is now saving the most, causing sales of the silk and textile division to fall 5.6 %.