Hermes to Raise Prices after Q4 Sales Boom

(FILES) This picture taken on December 20, 2017 shows the logo of the French fashion main house and luxury goods Hermes outside a shop in the fashionable and luxurious street "rue du faubourg Saint-Honore" in Paris. (Photo by STEPHANE DE SAKUTIN / AFP)
(FILES) This picture taken on December 20, 2017 shows the logo of the French fashion main house and luxury goods Hermes outside a shop in the fashionable and luxurious street "rue du faubourg Saint-Honore" in Paris. (Photo by STEPHANE DE SAKUTIN / AFP)
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Hermes to Raise Prices after Q4 Sales Boom

(FILES) This picture taken on December 20, 2017 shows the logo of the French fashion main house and luxury goods Hermes outside a shop in the fashionable and luxurious street "rue du faubourg Saint-Honore" in Paris. (Photo by STEPHANE DE SAKUTIN / AFP)
(FILES) This picture taken on December 20, 2017 shows the logo of the French fashion main house and luxury goods Hermes outside a shop in the fashionable and luxurious street "rue du faubourg Saint-Honore" in Paris. (Photo by STEPHANE DE SAKUTIN / AFP)

Birkin bag maker Hermes said it will raise prices this year after sales jumped 17.5% in the fourth quarter of 2023, demonstrating the resilience of high end shoppers despite economic headwinds.
Sales for the three months to the end of September totaled 3.36 billion euros ($3.62 billion), up 17.5% at constant foreign exchange rates. That was ahead of expectations for 14% growth, according to Visible Alpha consensus estimates.
The company plans to lift prices by between 8% and 9% this year globally, executive chairman Axel Dumas told reporters on Friday, according to Reuters.
One of the most consistent performers in the luxury goods industry, Hermes has a track record of outpacing rivals when economic conditions deteriorate, thanks to its classic designs and careful management of production and stocks, which helps maintain the label's aura of exclusivity.
Handbags like the coveted $10,000 plus Birkin model are affordable only for the wealthiest shoppers -- who are typically the more immune to choppy economic conditions.
Hermes will pay a 4,000 euro bonus to each of its over 22,000 employees worldwide, the company said.



LVMH Shares Drop after Missing Second-quarter Estimates

A man walks past a shop of fashion house Dior in Paris, France, April 15, 2024. REUTERS/Manon Cruz/File Photo Purchase Licensing Rights
A man walks past a shop of fashion house Dior in Paris, France, April 15, 2024. REUTERS/Manon Cruz/File Photo Purchase Licensing Rights
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LVMH Shares Drop after Missing Second-quarter Estimates

A man walks past a shop of fashion house Dior in Paris, France, April 15, 2024. REUTERS/Manon Cruz/File Photo Purchase Licensing Rights
A man walks past a shop of fashion house Dior in Paris, France, April 15, 2024. REUTERS/Manon Cruz/File Photo Purchase Licensing Rights

Shares in LVMH (LVMH.PA) fell as much as 6.5% in early Wednesday trade and were on track for their biggest one-day drop since October 2023 after second-quarter sales growth at the French luxury goods giant missed analysts' consensus estimate.

The world's biggest luxury group said late Tuesday its quarterly sales rose 1% year on year to 20.98 billion euros ($22.76 billion), undershooting the 21.6 billion expected on average by analysts polled by LSEG.

At 1000 GMT, LVMH's shares were down 4.5%.

The earnings miss weighed on other luxury stocks, with Hermes (HRMS.PA), down around 2% and Kering (PRTP.PA), off 3%.

Kering is scheduled to report second-quarter sales after the market close and Hermes reports on Thursday, Reuters reported.

Jittery investors are looking for evidence that the industry will pick up from a recent slowdown, as inflation-hit shoppers hold off from splashing out on designer fashion.

JPMorgan analyst Chiara Battistini cut full year profit forecasts by 2-3% for the group, citing softer trends at LVMH's fashion and leather goods division, home to Louis Vuitton and Dior.

"The soft print is likely to add to ongoing investors’ concerns on the sector more broadly in our view, confirming that even best-in-class players like LVMH cannot be immune from the challenging backdrop," said Battistini in a note to clients.

The weakness of the yen, which has prompted a flood of Chinese shoppers to Japan seeking bargains on luxury goods, added pressure to margins, another source of concern.

Equita cut 2024 sales estimates for LVMH by 3% - attributing 1% to currency fluctuations - and lowered its second half organic sales estimate to 7% growth from 10% growth previously.

The lack of visibility for the second half beyond the easing of comparative figures - as the Chinese post-pandemic lockdown bounce tapered off a year ago - is unlikely to improve investor sentiment to the luxury sector, Citi analyst Thomas Chauvet said in an email to clients.

"No miracle with the luxury bellwether; sector likely to remain out of favour," he wrote.

Jefferies analysts said the miss came as investors eye Chinese shoppers for their potential to "resume their pre-COVID role as the locomotive of industry growth and debate when Western consumers will have fully digested their COVID overspend".

LVMH shares have been volatile since the luxury slowdown emerged, and are down about 20% over the past year, with middle-class shoppers in China, the world's No. 2 economy, a key focus as they rein in purchases at home amid a property slump and job insecurity.

LVMH offered some reassurance, with finance chief Jean-Jacques Guiony telling analysts during a call on Tuesday that Chinese customers were "holding up quite well," while business with US and European customers was "slightly better".