(News Bulletin 247) – The luxury group announced that it had achieved a turnover of 3.805 billion euros in the first quarter, reflecting growth of 17% on a comparable basis, significantly above analysts’ forecasts. Leather goods are fueling the saddler’s growth this quarter.

Last year, Hermès managed to satisfy investors with each publication, a performance rare enough to be highlighted. And once again, the luxury group’s delivery was particularly closely monitored in a context that was still difficult for luxury players. On Wednesday, investors did not fail to punish Kering which once again froze the market after revealing sharply falling quarterly sales, themselves accompanied by degraded prospects.

As for Hermès, the saddler has once again honored its rank in this wave of publications. Over the first three months of the year, the group published sales above expectations, and seems immune to the slowdown in demand in Asia.

Over the entire period from January to the end of March, Hermès generated revenues of 3.805 billion euros, up 13% in published data year-on-year and 17% excluding currency effects.

“The solid growth in sales in the first quarter of 2024 demonstrates the loyalty of our customers around the world, the strength of the group’s artisanal model and the desirability of creations, in a more complex environment. Hermès is continuing its strategy which is based on exceptional know-how, the finest materials and an uncompromising demand for quality,” declared Axel Dumas, the manager of Hermès, in a press release.

The organic growth of the Hermès group therefore appears “higher than the consensus” which expected an increase of 14%, and “generally in line with analysts’ expectations”, notes Stifel.

Japan in strong growth

Hermès revealed double-digit organic growth in all geographic areas where the group is present. In Japan, Hermès recorded growth described as “exceptional” by the company, with an increase in revenue at constant exchange rates of 25% over one year, where the consensus expected an increase of 21%. Hermès was able to count on “the loyalty of its local customers”.

In other regions, growth remained robust in the first quarter with revenue growth of 15% excluding currency effects in Europe, where the consensus anticipated a 13% increase in activity in the region. Japan and Europe excluding France “were the main engines of growth” in the first quarter, Stifel suggests.

Regarding the Asia-Pacific region excluding Japan, which is the focus of market fears, the group is posting double-digit growth. Over the first three months of 2024, this region recorded growth at constant exchange rates of 14%, above the 13% expected by the consensus.

“The desirability of the objects and the house value strategy made it possible to compensate for the slight decline in traffic in Greater China observed at the end of the Chinese New Year,” explains Hermès.

In France, activity grew by 14% at constant exchange rates, which is slightly above expectations (+13%), while the Americas region disappointed slightly, with an increase of 12% in activity in these same bases, when the consensus expected a little more (+13%).

“From a geographic perspective, Europe and Japan were the best performers, while the Americas and the rest of Asia were more or less in line with market expectations,” summarizes Morgan Stanley.

By division, leather goods and saddlery saw growth reach 20% excluding currency effects, which is significantly higher than expectations (+15%) and also explains the overall performance of Hermès over the quarter.

Clothing and accessories are also doing well with an increase of 16%, excluding exchange rate effects, just like other businesses – which include jewelry and the home world – which are up 24.5%, over these same bases. The consensus anticipated an increase of 14% for these two divisions.

While the slightly smaller divisions showed growth in their activity “generally in line” with expectations (+8% for silk and textiles, +4% for perfumes and +4% for watches) , notes Stifel.

An addiction to bags?

Overall, Hermès achieved “a solid start to the year, supported by above-average prices (+8-9%), which confirms the resilience of its main leather goods division, the desirability of the Hermès brand and the defensive appeal of the stock in a context of more difficult demand for the sector this year”, adds the research office.

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.

Hermès therefore offered the market a quality publication, which exceeded expectations. But the quarterly performance of the good student in the luxury sector is no longer enough to satisfy the market, as evidenced by the reaction of the stock on the Paris Stock Exchange. Hermès shares returned 2.8%, to 2,288 euros, to be among the biggest falls in the flagship Parisian index.

Morgan Stanley, however, provides an element of response to this timid reception. According to the research office, the most skeptical “will argue that the more aspirational categories (for example perfumes, watches, etc.) have slowed down sequentially (from one quarter to the next, Editor’s note) compared to the fourth quarter 2023 and the second quarter 2023 (but were nevertheless in line with market expectations)”.

“Hermès is ultimately not fully immune to the pressure on middle-income consumers globally – leaving growth for the rest of the year potentially more dependent on waitlisted products (i.e. say bags)”, continues the research firm, which recognizes that Hermès “continues to significantly outperform the rest of the luxury goods sector”.