(News Bulletin 247) – The luxury group announced that it had achieved a turnover of 3.36 billion euros in the third quarter, reflecting growth of 17.5% on a comparable basis, significantly above the forecast for analysts. Asia and the Americas have accelerated well and the group’s action is progressing significantly this Friday.

Last year, Hermès managed to satisfy investors with each publication, a performance rare enough to be highlighted, especially in luxury where even LVMH has sometimes been sanctioned.

This is still the case at the start of 2024, while Hermès unveiled its annual results and its activity for the fourth quarter of 2023 this Friday.

The group ended the year on a good note, achieving a flawless performance. Over the entire period from October to the end of December, the third largest market capitalization on the Paris market generated revenues of 3.37 billion euros, up 12.5% ​​in data published on one year and 17.5% excluding currency effects.

“The group is continuing the trend recorded in the third quarter thanks to sustained activity,” said Axel Dumas, the manager of Hermès, in a press release.

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Sales exploding in Asia and America

According to a consensus cited by Bank of America, analysts on average only expected growth of 14% in the fourth quarter excluding currency effects. This increase of 17.5% also marks a small acceleration compared to the third quarter, a period when the group maintained an impressive increase in sales of 15.6% (in comparison LVMH had progressed “only” by 9% over the same period).

Without too much surprise, the market appreciates this immaculate publication, with Hermès shares gaining 4.3% around 9:10 a.m., which constitutes the strongest progression in the CAC 40.

In detail, Hermès recorded a clear acceleration in all of its geographies, particularly in the “Asia-Pacific excluding Japan” region, where its sales increased by 14.8% at constant rates, compared to an increase of 10 .2% over the previous three months. The “Americas” zone slightly improved its dynamic with growth of 21.6% on a like-for-like basis, compared to 20.4% in the previous quarter.

The acceleration in Europe (excluding France) is remarkable, with growth going from 18% in the third quarter to 21% in the fourth. France is the only region to see its dynamics slow down (15.5% compared to 18.3%). Finally, Japan continues to fuel the growth of luxury groups. Hermès saw its sales increase by 26.2% at constant rates in the country, compared to 24.1% in the third quarter.

Over the whole of 2023, Hermès recorded an increase in sales of 20.6% at constant exchange rates for revenues of 13.43 billion euros. Growth has thus barely weakened compared to that of 2022 (+23.4% at constant exchange rates). This illustrates how the “normalization” of demand which has affected the luxury sector for several quarters has only limited effects for the moment on Hermès.

Exceptional dividend

The group’s operating margin increased significantly, going from 40.5% in 2022 to 42.1% in 2023. Net profit reached 4.31 billion euros, an increase of almost 30% over one year.

“Once again in 2023, Hermès has cultivated its uniqueness and achieved remarkable performances in all businesses and all geographic areas, on high bases,” declared Axel Dumas.

Hermès announced that it intended to pay a dividend of 15 euros per share with, in addition, an exceptional dividend of 10 euros per share.

Regarding its prospects, the company has, as usual, avoided giving any figures. “In the medium term, despite economic, geopolitical and monetary uncertainties in the world, the group confirms an ambitious objective of increasing turnover at constant rates,” Hermès once again reiterated.

“The group is approaching 2024 with confidence, on the strength of its highly integrated artisanal model, its balanced distribution network, the creativity of its collections and the loyalty of its customers,” the group also declared.

A pricing policy that is sometimes “misunderstood”

During a conference with analysts, Axel Dumas confirmed that Hermès’ overall prices would increase by 8% to 9% in 2024. The executive explained that these price increases were not made “based on desirability ” or the ability of customers to pay its prices but according to the group’s “cost price”, that is to say its costs. These costs increase by around 6% and the balance of Hermès’ price increases is used to cover around half of the unfavorable currency effects, he added.

Axel Dumas declared that he felt “sometimes misunderstood” about this pricing policy which can lead him to increase his prices less sharply than other luxury players, and, on the contrary, sometimes more sharply.

“There is no price marketing with us,” he insisted. “I think clients sometimes recognize it a little more than analysts,” he continued.

The executive also said he was “very confident about the Chinese market in the medium-long term.”

“Hermès is a real exception in the sector which will demonstrate better relative resilience in a possibly less virtuous environment,” praises Sarah Thirion of TP ICAP Midcap.

“Hermès remains the best-in-class (the best student, Editor’s note) in the sector, offering defensive growth through its exceptional and timeless nature,” the equity strategist further appreciates.

“Overall, we expect investors to react positively to the publication, Hermès being one of our favorite stocks,” adds UBS in a note published before the market opened.