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Hermes Q1 Sales Jump 17% on Growth Across Regions

(FILES) An employee holds a USD129,000 crocodile Hermes Birkin Bag for the press to see during a private opening for the new Hermes store on Wall Street in New York 21 June 2007. (Photo by Timothy A. CLARY / AFP)
(FILES) An employee holds a USD129,000 crocodile Hermes Birkin Bag for the press to see during a private opening for the new Hermes store on Wall Street in New York 21 June 2007. (Photo by Timothy A. CLARY / AFP)
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Hermes Q1 Sales Jump 17% on Growth Across Regions

(FILES) An employee holds a USD129,000 crocodile Hermes Birkin Bag for the press to see during a private opening for the new Hermes store on Wall Street in New York 21 June 2007. (Photo by Timothy A. CLARY / AFP)
(FILES) An employee holds a USD129,000 crocodile Hermes Birkin Bag for the press to see during a private opening for the new Hermes store on Wall Street in New York 21 June 2007. (Photo by Timothy A. CLARY / AFP)

Birkin bag maker Hermes reported a 17% surge in first-quarter sales on Thursday, sustaining a rapid growth rate from the previous quarter 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, Hermes 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 , underlining the strength of businesses operating in the top end of the market and defying broader weakness in key market China.
Sales updates from several leading luxury groups including LVMH and Kering have offered little reassurance that Chinese demand for high-end fashion is bouncing back, Reuters reported.
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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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".