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Asian Sales Propel Hermès to Impressive Third Quarter Performance

The French luxury group joins rival LVMH in largely shrugging off fallout from Hong Kong’s political protests, with sales at Hermès up 15 percent in the third quarter.
Shoppers queue outside Hermès in Hong Kong, China | Source: Shutterstock
By
  • Laure Guilbault

PARIS, France — Demand from Chinese consumers helped Hermès International post 15 percent sales growth for the third quarter, beating expectations.

The French company, best known for its pricey leather goods and squared silk scarves, said sales for the third quarter period grew 18 percent on a reported basis to €1.727 billion ($1.92 billion), and were up 15 percent at stable exchange rates.

"Despite an uncertain international environment, Hermès is experiencing exceptional sales growth over the first nine months reflecting our creative drive, excellent know-how and customers' adhesion," Hermès Chief Executive Axel Dumas stated.

Disruption caused by the ongoing political protests in Hong Kong didn’t stop sales in the Asia-Pacific region (excluding Japan) accelerating to 24.8 percent in the third quarter on a reported basis, up from 20.7 percent in the second quarter. Hermès generates around 6 percent of its sales in Hong Kong, according to Morgan Stanley estimates.

In China, Hermès opened its 26th store in Xiamen in July, and is also developing a new online platform. “As shown by the LVMH third quarter results, strong brands are faring well despite Hong Kong. Consumers shop in Mainland China instead," said Luca Solca, a luxury analyst at Sanford C. Bernstein Schweiz.

Louis Vuitton owner LVMH posted faster-than-expected third-quarter sales growth on October 9, allaying some concerns about the effects of the Hong Kong disruptions. The demonstrations have curbed travel by mainland Chinese consumers and hit sales in the Special Administrative Region. Analysts will be watching to see if Kering, parent of Gucci, Bottega Veneta and Balenciaga, will have performed on a par with their two luxury rivals. The conglomerate is set to report its third quarter earnings after markets close on Thursday.

Leather goods sales, the lion's share Hermès business, grew 15.1 percent to €839.9 million (11.5 percent at constant exchange rates), beating expectations, while ready-to-wear accelerated to a 24.5 percent growth rate in the period (21.5 percent at constant exchange rates), the category’s highest since the first quarter of 2014.

“Given the consistency of Hermès' growth, over the long term, it is clearly one of the fastest growing brands,” wrote Morgan Stanley equity analyst Edouard Aubin in a report.

The group reports annual results on February 26, 2020.

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