Hermes Reports Strong Record Profits In China
Hermes, a manufacturer of Birkin bags, saw a sharp increase in sales in the second quarter, driven by strong growth in the U.S. and Europe as well as a strong recovery in China in June.
Hermes is a French luxury design house founded in 1837. It has a focus on leather products, fashion accessories, home decor, jewelry, timepieces, and ready-to-wear. Since the 1950s, a horse-drawn Duke carriage has served as its logo.
About 30% of Hermès' sales are made up of leather goods, 15% are made up of clothing, 13% are made up of scarves, and 43% are made up of other things. Hermès does not license any of its goods and maintains strict control over the design and production of its vast inventory.
The company is adamant about sticking with its established business model and disapproves of mechanization, assembly lines, and mass production.
The majority of Hermès' products are handcrafted in France in medium-sized, quality-focused workshops known as Les Ateliers Hermès. In fact, Hermès asserts that the majority of its products are made entirely by one person, which is meant to ensure their high quality and originality.
The French leather goods company, which is particularly known for its silk scarves with equestrian patterns, reported that sales strongly recovered in the final month of the quarter following lockdowns in China in April and May.
Luxury merchants reported a reduction in sales of over 30% in China, a critical market for the sector, during the course of the quarter, as a result of measures to restrict movement in important Chinese cities like Shanghai and Beijing.
Axel Dumas, the executive chairman of Hermes, refused to provide a number for the group's Chinese sales during the quarter but said they had decreased less than rivals had claimed. He said that the increase in June had not completely offset the fall in April and May.
Hermes had a substantial increase in sales in the second quarter, driven by robust growth in the U.S. and Europe as well as a good recovery in China in June.
In the three months ending in June, overall sales were 2.7 billion euros ($2.76 billion), an increase of 19.5% at constant exchange rates, which take into account currency swings.
According to Luca Solca, a luxury analyst at Bernstein, "This set of results confirms that Hermes is likely going to be the most resilient luxury goods player in a recession and an appropriate hiding place for those seeking cover."