Hermes sales went up because of strong growth in the U.S. and China.
(Reuters) – PARIS Hermes Birkin bag sales grew more than expected in the fourth quarter, thanks to strong sales in the United States and double-digit growth in China, even though the rest of the industry was hurt by more COVID infections.
After the pandemic, European luxury brands had a strong comeback because people used the money they saved during lockdowns to buy clothes with designer labels.
At the end of last year, COVID infections went up in China, which hurt most of the industry. However, Hermes executive chairman Axel Dumas told analysts on Friday that Hermes “continued to see strong demand in China.”
During the Chinese New Year, Dumas said, there was a lot of demand for all of its products from Chinese clients.
According to a Visible Alpha consensus, analysts expected sales to grow by 17% at constant rates for the three months ending in December. Instead, sales rose by 22.9%, reaching 2.99 billion euros ($3.2 billion).
The company said that its annual recurring operating profit reached a record high of 40.5%, up from 39.3% in 2021. It also said that it was optimistic about 2023.
Bernstein analyst Luca Solca said, “Hermes has ploughed through the COVID-19 issues in 4Q22 and come up with a very solid beat to consensus.”
In September, the company opened a huge store on Madison Avenue in New York, which boosted sales by 40.8% in the United States.
Some of their competitors had weaker sales there because business was moving to Europe, where Americans who were travelling took advantage of the strong dollar.
Hermes said that at its next general meeting on April 20, it would propose a dividend of 13 euros per share and give all of its employees a bonus of 4,000 euros.
In early morning trading, the shares were down 1.4%. They are up 20.48 percent so far this year.
Analysts at J.P. Morgan wrote in a note, “The stock has been very strong so far this year, and expectations were high going into today. However, the operational outperformance should justify more gains this morning.”
The company raised prices by about 7% in January, citing rising labour costs as the reason. In 2022, the company raised prices by about 4%.
Over the past few years, big luxury brands like Chanel and LVMH’s Louis Vuitton have been raising prices to keep their brands exclusive. Hermes, on the other hand, has only made small changes to its prices.
UBS thinks that Louis Vuitton’s prices will go up by 9.6% in 2020 and 3.7% in 2022, while Hermes’ prices will only go up by 1% and 2.1% during those same years.
Hermes said it had added 4,300 jobs over the past three years, including 2,900 in France, and planned to hire more people this year.
($1 = 0.9399 euros)