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It's official: Luxury is booming

Hermes International’s revenue has more than doubled, surpassing pre-pandemic levels

A model wears a creation as part of the Spring-Summer 2022 men's fashion collection by Hermes in Paris on 26 June.
A model wears a creation as part of the Spring-Summer 2022 men's fashion collection by Hermes in Paris on 26 June. (AP)

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.

Also read | Rolex, Gucci are gobbling up our covid-19 savings

Sales in the Americas led by the US 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.

Two weeks ago, Cie Financiere Richemont SA and Burberry Group Plc reported roughly doubling sales from their fiscal first quarter. On Monday it was time for LVMH Moet Hennessy Louis Vuitton SE, the world’s biggest luxury goods group, to shine. Its fashion and leather goods sales, excluding mergers and acquisitions and currency movements, rose by 122% in the second quarter, compared with the year earlier, ahead of analysts’ expectations. The group’s first-half operating profit was almost five times higher than in 2020, and 44% ahead of 2019.

All three companies saw sales outstrip those of 2019, quite a feat given the disruption they faced last year as stores closed and international travel ground to a halt, reports another report from Bloomberg.

And yet, from inflation to competition, the luxury groups have reason to be cautious about the months ahead.

Many purchases of high-end goods over the last year were fuelled by shoppers having little else to spend on. As economies continue to open up, there will be more competition from the hospitality sectors. LVMH said on Monday that it was seeing no signs of this so far: Luxury demand remained strong in the US, while Chinese consumers haven’t lost their appetite for top-end goods amid the region’s reopening.

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