Sales growth at Hermès eased in the final quarter of last year, missing market forecasts and sending its shares down as much as 7 percent, as self-imposed production caps kept the group from meeting demand for its prized handbags.

The slower revenue increase in the key holiday period, in contrast with an acceleration at other luxury groups, put Hermès, one of the industry’s strongest names, in the unusual position of underperforming rivals.

“Hermès is one of the last large-cap luxury stocks to report, and this does not quite echo LVMH, Kering and Richemont’s recent results,” Citi said in a report.

Investors could also be disappointed by the lack of a special dividend, which some had expected, it added.

Hermès shares fell 5 percent by 09:20 GMT on Friday, having fallen as much as 7 percent earlier, for their worst day since September 2016 and their lowest price in more than eight months.

Sales at Hermès’ leather goods and saddlery division, which includes its famed Birkin and Kelly handbags and account for almost half the total, fell by 5.4 percent over the period, with the company citing capacity constraints.

Hermès caps volume growth in its leather goods production at 6 percent to 7 percent annually, preferring to have long waiting lists for its products rather than accelerate production — and executive chairman Axel Dumas said the group had no plans to change that.

“It takes 15 hours for an Hermès bag. Even if there’s a lot of demand, I’m not going to start doing them in 13 hours to raise production,” Dumas told reporters.

The group recruits about 400 artisans per year — but not many more, given the time it takes to train them, he said.

“Contrary to what people may think, we’re always very sad when we have to say to our customers, ‘No’, because we don’t have that,” he said, adding that the group had considerably run down stocks last year.

Overall sales rose to €2.38 billion ($2.71 billion) in the three months to December, with US and Chinese shoppers driving growth.

That compared with a consensus forecast for revenues of €2.53 billion and 12 percent growth at constant exchange rates cited by UBS.

The 11 percent increase compares with growth of 31 percent in the third quarter and 127 percent in the second. The group’s profitability margin also eased in the second half of the year to 38.1 percent, analysts said.

That compared with a margin of 41 percent for rival LVMH’s fashion and leather goods division, led by Louis Vuitton and Dior, and 38.2 percent for Kering’s top brand Gucci.

Still, Hermès has weathered the Covid-19 pandemic better than many rivals, and its 2021 sales grew by 42 percent from a year earlier and by 33 percent from 2019 levels.

Revenues exceeded their pre-pandemic levels in all regions except France, where business has been dented by the absence of deep-pocketed tourists.

Dumas said Hermès had increased global prices by 3.5 percent on average this year, above the usual rate of 1.5 percent, to reflect a rise in production costs in Europe, with regional price adjustments to account for currency fluctuations.

That is below rivals’ more aggressive price increases, such as an average hike of 7 percent worldwide by Louis Vuitton this week.

Dumas said Hermès would not increase prices to boost its results. Given its hand-crafted production, Hermès is less exposed than rivals to increasing costs of energy and primary materials, he added.

By Mimosa Spencer and Silvia Aloisi; Editors: Mark Potter and Clarence Fernandez

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