Hermes sees luxury demand recover from pandemic freeze

Leather goods account for half of Hermes's sales. PHOTO: REUTERS

PARIS (BLOOMBERG) - Hermes International returned to growth as consumers regained an appetite for products like Birkin bags after lockdowns earlier this year.

Third-quarter revenue at its leather-goods division rose 7.8 per cent at constant currency, the Birkin maker said in a statement on Thursday (Oct 22). Analysts had expected an increase of 7 per cent.

Overall, revenue came in at 1.8 billion euros (S$2.89 billion) during the period, beating estimates by 100 million euros and also returning to growth.

Hermes said that for the full year, the impact of the Covid-19 epidemic remains difficult to assess, but it confirmed an "ambitious goal for revenue growth at constant exchange rates" in the medium term.

Pent-up demand is helping Hermes after lockdowns in the first half left consumers with few options to acquire the company's pricey handbags and silk scarves known as "carre". The brand limits the amount of exclusive products offered in stores and online to create scarcity.

Leather goods account for half of Hermes's sales, leading some analysts to question whether the company is too dependent on a few iconic products. However, the company is increasingly keeping a larger proportion of handbags out of stock, according to Edouard Aubin, an analyst at Morgan Stanley.

"The price of Hermes's bags on the second-hand market keeps increasing, an important barometer of desirability," Mr Aubin wrote ahead of the results.

Revenue growth resumed in Asia-Pacific including Japan, led by the appetite of Chinese shoppers. Europe and the Americas meanwhile saw revenue fall but at a slower pace than in the second quarter.

Hermes shares have rebounded from a low in March, closing at a record on Tuesday. The stock is up 20 per cent for the year to date.

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