Hermès reports a 6.4% increase in net profit for the first six months of the year. Despite a “more complex” economic context, the saddler continues to outperform the luxury goods market: its sales continue to post double-digit growth in all its markets, while its positions in Asia (excluding Japan) show good resilience.
While the list of luxury players whose recurring operating income was weighed down by the slowdown in the Chinese market continued to grow in the first half of the year, the world’s third-largest luxury brand (by market capitalization) once again demonstrateda certain… French exceptionalism.
Hermès posted sales up 15% at constant exchange rates for the first six months of 2024.
At a time when LVMH and Kering have seen their recurring operating income fall by -8% and -42% respectively, Hermès has topped its rivals with an increase of +7%, to 3.1 billion euros.
Half-year net income climbed +6. 4% to 2.37 billion euros, despite sluggish consumption in China.
A more difficult context
After a 17% rise in sales in the first quarter of 2024, the luxury goods group continued to gallop in the second quarter, with sales up 15% on a comparable basis (excluding currency effects), to 3.70 billion euros. These are exceptional results for the first half of the year, given “economic, geopolitical and monetary uncertainties around the world”. At 42%, the French group’s operating margin before non-recurring items remains one of the highest in the luxury goods sector, despite a slight downturn due to significant currency effects.
“The solidity of our first-half results, in a more complex economic and geopolitical context, reflects the strength of the Hermès model”, enthused Axel Dumas, Hermès’ managing director. This great-grandson of founder Emile Hermès continued, “Confident in the future, the Group is pursuing its investments, vertical integration projects and job creation, while remaining true to its values.”
For Antoine Fraysse-Soulier, Head of Market Analysis at eToro, “these figures are all the more satisfying, given that the luxury goods sector is in a phase of slowdown, or even negative growth, and that the geopolitical context is complex.”
Robust growth worldwide, holding up well in Asia
The tricolored group reports that “all regions continued to enjoy remarkable momentum, with the exception of Asia due to a downturn in traffic in Greater China” (mainland China, Hong Kong, Taiwan and Macao). Hermès managed to hold up well in the first half of the year “despitea drop in traffic following the Chinese New Year in the first quarter in Greater China”.
In the Asia-Pacific region (excluding Japan), sales rose by +6.8% to 3.5 billion euros in the first half. “We remain with a very local customer base”, said Axel Dumas on a conference call. “We have good figures in Greater China, thanks to Chinese customers”, he added.
This resilience can be explained as much by the loyalty of its customers “all over the world” as by the numerous investments recently made by the group in the Asia-Pacific region, including China.
In June, the Lee Gardens store in Hong Kong reopened after expansion, following the reopening in May of the renovated Beijing SKP store in China. In April, the Mumbai Jio World Plaza store opened its doors, embodying the company’s third address in India.
As Antoine Freysse-Soulier (eToro) points out, “Hermès’ strengths remain its artisanal manufacturing model, as well as its exclusive distribution network with store openings and extensions.”
While Asia (excluding Japan) is struggling with slowing growth (albeit contained by Hermès), the climate in the Land of the Rising Sun is radiant.
Bolstered by its local clientele, Japan (+22%) continues to enjoy strong growth. A new store was inaugurated in Tokyo’s Ginza district in June, following the opening of a store in the Azabudai Hills district in February.
Thanks to “continued momentum in the United States”, sales rose by +12. 1% to 1.33 billion euros in the Americas.
Finally, sales in France rose by +14.7% to 680 million euros.
Continued momentum driven by the leather goods segment
Boosted by “increased production capacity” and “particularly sustained demand”, the Leather Goods-Saddlery segment turned in a remarkable performance (+19%). Hermès continues to expand its production capacity, with theopening of the Riom leather goods factory (Puy-de-Dôme) in September 2024, as well as the construction of two new leather goods factories: Isle-d’Espagnac (Charente) in April and Loupes (Gironde) in May, scheduled to open in 2025 and 2026 respectively.
Sales of clothing and accessories rose by 12.5% to 2.16 billion euros. Sales of perfumes and beauty products reached 259 million euros (+3.9%). Sales in the “other crafts” segment (jewelry and home products) approached the billion euro mark (+15.7%). The silk and textile segment declined by -1.7% to 436 million euros, while watchmaking fell by -2. 9% to 308 million euros.
In view of this dynamic performance, the saddler is confident about the future. In the medium term, the group “confirms an ambitious sales growth target at constant exchange rates”.
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