Chinese demand helps Hermes to a strong first quarter
Paris — Thriving demand in China boosted sales at Birkin bag marker Hermes in the first quarter, underscoring an upbeat start to the year for some of the luxury sector’s biggest names.
From fashion labels to jewellers, many companies in the industry have reported better than expected sales at the start of the year, with strong demand from Asian and US shoppers.
That has helped offset a slowdown in tourist spending in Europe, while luxury consumers have so far shrugged off trade tensions between Beijing and Washington.
Hermes, known for its $10,000-plus hand-stitched Birkin and Kelly bags, said revenue in the first quarter rose 11% in constant currencies from a year ago — an uptick from the previous three months and more than analysts had forecast.
"The performance of our first quarter is probably beyond our annual objective," CEO Axel Dumas told journalists. "This was a strong start."
Dumas said the drag from currency fluctuations, which hit sales by €104m in the quarter, should ease later in the year. On a reported basis, Hermes’ sales rose 3% to €1.34bn between January and March.
Europe-based luxury groups are grappling with a stronger euro, which penalises revenue converted back into the currency and can put off foreign shoppers in the region.
Sales in China have proved resilient, though, and Hermes said revenue in Asia, excluding Japan, rose 16% on a constant currency basis in the first quarter.
The group opened a three-storey flagship store in Hong Kong in January.
Like LVMH-owned Louis Vuitton, Hermes — which trades off its "Made in France" appeal — is opening new handbag workshops to keep up with demand, as well as expanding online sales.
The firm, which derives the biggest chunk of earnings from leather goods, posted particularly strong growth in other divisions including in its fashion lines, perfumes and jewellery business.
The luxury industry’s biggest conglomerates, LVMH and Gucci owner Kering, also posted strong sales for the first quarter, even against a tough comparison base, though the sector’s performance has been uneven.
Some companies shaking up their offers to appeal to younger consumers, like German fashion house Hugo Boss, have shown signs of a turnaround. Italy’s Salvatore Ferragamo, which has struggled to boost sales, reports first-quarter revenue next week.
Hermes shares have risen about 20% so far this year.