By Mimosa Spencer
PARIS (Reuters) -Birkin bag maker Hermes reported a 17% surge in first-quarter sales on Thursday, sustaining a rapid growth rate from the previous quarter including in China, and underlining strong demand for high end luxury.
Sales rose to 3.81 billion euros ($4.08 billion) for the three months to March 31 and beat expectations for a 13% rise, according to consensus provider Visible Alpha.
One of the most consistent performers in the luxury goods sector, the fashion group is known for its ability to maintain strong growth even in the face of deteriorating economic conditions.
Its first-quarter growth far outpaced larger rival LVMH, showing the strength of businesses operating in the top end of the market and defying broader weakness in key market China.
“Hermes has produced another material beat to consensus today,” said analysts at Bernstein.
Sales updates from several leading luxury groups including LVMH and Kering (EPA:) have offered little reassurance that Chinese demand for high-end fashion is bouncing back.
Consultancy Bain forecasts mid-single-digit percentage growth for China’s luxury market this year, after 12% growth in 2023, when business boomed following the lifting of COVID-related lockdowns.
Hermes, which sells handbags priced at more than $10,000, said its sales in Asia excluding Japan grew 14%, and all other regions reported double-digit rises.
The company saw “slightly softer” traffic in China in March following the Chinese New Year holiday, Eric du Halgouet, executive vice-president finance, told journalists.
However strong demand from wealthier clients offset a reduction in purchases by those seeking more affordable silk items and fashion accessories, he said.
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“Our more well-off clients continued to visit our stores,” said du Halgouet, noting that average spending was higher.
Globally, the leather goods division, the company’s largest, grew by 20% in the quarter, driven by new models such as the Constance Elan bag.
After holding back while Chanel, LVMH-owned Dior and Louis Vuitton raised prices of their handbags more aggressively during the pandemic, Hermes started raising prices more significantly from last year.
This year’s increase of 8% will provide it with a tailwind, added the Bernstein analysts.
Hermes has a higher valuation than rivals with a 12 month forward price-to-earnings ratio based on projected earnings of 51, according to LSEG data. That compares with LVMH at 24 and Kering at 16.
($1 = 0.9340 euros)
