Hermes, maker of Birkin and Kelly bags as well as other luxury accessories, recently reported a 17{d4bf18f9c703db112d50a790bd35a5723e8d11a7d54b42f2d771667e0d1a6cd7} jump in first-quarter sales driven by strong leather sales and robust Chinese demand, defying global luxury slowdown. Revenue reached $4.1 billion or EUR3.8 billion with double-digit growth across all regions – surpassing FactSet estimates of 13{d4bf18f9c703db112d50a790bd35a5723e8d11a7d54b42f2d771667e0d1a6cd7} increase and $4 billion sales growth; this report did not contain earnings figures.
Leather goods and saddlery sales saw an unprecedented 20{d4bf18f9c703db112d50a790bd35a5723e8d11a7d54b42f2d771667e0d1a6cd7} sales spike due to new models released, accounting for more than 40{d4bf18f9c703db112d50a790bd35a5723e8d11a7d54b42f2d771667e0d1a6cd7} of Hermes revenue. Meanwhile, ready-to wear and accessories experienced an 18{d4bf18f9c703db112d50a790bd35a5723e8d11a7d54b42f2d771667e0d1a6cd7} sales uptick, both surpassing FactSet estimates.
Sales in Asia-Pacific excluding Japan accounted for more than half of group revenues and saw sales increases of 14{d4bf18f9c703db112d50a790bd35a5723e8d11a7d54b42f2d771667e0d1a6cd7} despite China’s economic slowdown negatively affecting other luxury brands. Both Japan and Americas saw increases of 25{d4bf18f9c703db112d50a790bd35a5723e8d11a7d54b42f2d771667e0d1a6cd7} and 12{d4bf18f9c703db112d50a790bd35a5723e8d11a7d54b42f2d771667e0d1a6cd7}.
Hermes’ French conglomerate competitors faced hurdles: LVMH reported only a modest 3{d4bf18f9c703db112d50a790bd35a5723e8d11a7d54b42f2d771667e0d1a6cd7} rise in sales for the first quarter, and Gucci owner Kering saw an unexpected 40-45{d4bf18f9c703db112d50a790bd35a5723e8d11a7d54b42f2d771667e0d1a6cd7} decrease in profits.
Hermes shares declined 4.7{d4bf18f9c703db112d50a790bd35a5723e8d11a7d54b42f2d771667e0d1a6cd7} in Paris afternoon trading but are up 16.3{d4bf18f9c703db112d50a790bd35a5723e8d11a7d54b42f2d771667e0d1a6cd7} year-to-date, outperforming rivals LVMH (4.5{d4bf18f9c703db112d50a790bd35a5723e8d11a7d54b42f2d771667e0d1a6cd7}) and Kering (19.1).
Forbes ranks Nicolas Puech as the 126th wealthiest person worldwide with an estimated net worth of around $14.9 billion. Although he left Hermes’ board of supervisors in 2014, he still owns 5{d4bf18f9c703db112d50a790bd35a5723e8d11a7d54b42f2d771667e0d1a6cd7} stake.
Key Background China, which holds the second-largest luxury market globally, has experienced economic difficulties that have had an adverse impact on major luxury players such as LVMH and Kering. Hermes, however, has outshone competitors by outperforming in an increasingly fragmented Chinese marketplace. No matter the economic climate, Hermes remains popular with ultra-wealthy consumers despite having seen spending decline. Barclays analysts noted that in an overly-polarized market, brands with “more exposure to high-end customers or greater pricing power may emerge as leaders; Hermes meets this criteria.” 
Hermes has established itself as a luxury brand through its exclusive marketing approach aimed at the wealthy, cementing its position among luxury brands. Unfortunately, this strategy has led to legal complications; two Californians filed a class-action antitrust lawsuit in March against Hermes over its restriction of buying Birkins for customers with sufficient purchases of “ancillary items”. These Birkins cannot be seen at stores; only private showings allow customers access to them. Hermes has since announced an 8-9 increase in prices this year in response to these controversies arising.
Bernstein analyst Luca Solca notes that Hermes has adopted Ferrari’s philosophy as part of their core strategy tenet and that this allows them to increase prices without being affected by consumer spending changes.
Record Sales The record sale of a Birkin handbag was at $513,000 or HK$4 million – sold at Christie’s auction house in 2021 for the highest amount ever. It was the Himalaya Niloticus Kelly made of 18k white gold studded with diamonds; sold at Christie’s for its highest bid at that time – making it one of the most expensive ever, although excluding some limited edition bejeweled Birkins that cost approximately $2 million each. Secondary market prices can often double retail price – reflecting their high demand due to limited supply – rather than easy shopping opportunities at retail shops that make finding them easily.
