Hermès Q1 Revenues Rise 27% But Slower in Handbags & China - BY pursebop.com

Hermès Q1 Revenues Rise 27% But Slower in Handbags & China - BY pursebop.com

BY pursebop.com - 

 

You may not be able to get the Hermès bag of your dreams, but someone did. And plenty of other items apparently flew off of the orange shelves. For the first quarter of 2022, Hermès reports a 27% increase in sales revenues (all discussed at current exchange rates), beating analysts’ expectations. Its report states:

“Sales were particularly dynamic in group stores, especially in America and Europe, driven by the acceleration in all the business lines and the sustained growth in Leather Goods.”

Image Credit: @msrach_

Let’s break this down a bit, starting with geography. As noted, the largest percentage growth in revenues over Q1 2021 occurred in Europe (up 42%) and the Americas (up 44%). Sales in France (reported both separately and within the Europe group) particularly improved. For the same period in 2021, revenue growth in Europe (including and excluding France) actually declined, due to the pandemic. With boutiques now open and tourists returning, the boost in Europe makes sense.

All of that means China (termed Asia, not including Japan) was not the revenue star this quarter, but still rising near 20%. No doubt (and as pointed to in the report), the March health restrictions and store closures in China were impactful. However, make no mistake, revenues in China are by far greater than any other area – nearly three times all of Europe.

As for business lines, Hermès reports its largest (and our favorite) Leather Goods & Saddlery essentially grew the least. Not to worry, revenue was up 16%, but that was modest compared to other groups.

It also reinforces the feeling of those wanting a new Hermès handbag: the supply just isn’t there. Which likely explains, in part, why Hermès points to its “increase in production capacity and sustained demand” as well as the facilities being created now. 

Image Credit: Vince Talotta/Toronto Star

Additionally, it appears home decorating à la Hermès is waning, or at least it did this quarter. Revenues in the “Other Products” line (which includes home goods as well as jewelry) rose 11%. Last year for the same time period, revenues here spiked 90%!

This quarter Watches (the second smallest revenue group after Other Products) shot up 62%. Hermès points to the introduction of its new Arceau, Le temps voyageur watch, as responsible for the growth.

Image Credit: Hermès, Neiman Marcus

Ready-to-Wear and Accessories revenue grew 44% and Silk and Textiles went up 27%. Hermès fashion remains in fashion, even beyond handbags. 

As for the rest of 2022, Hermès says:

“The impacts of the health context are still difficult to assess. . . [we] look to the future with confidence.

In the medium-term, despite the economic, geopolitical and monetary uncertainties around the world, the group confirms an ambitious goal for revenue growth at constant exchange rates.”

 

Image Credit: TheChicSelection.com

Is anyone surprised by the essence of these results?  Demand for Hermès products remains high but is constrained by supply particularly for handbags; and growth in China slowed this quarter. 

On the other hand, paucity of handbags led to a marked improvement in sales of Ready-to-Wear and Silks. Could this be the strategy all along? Limit bags – as per reports of quotas – at least until supply can catch up, and shift consumers attention to other products. Put another way, a win-win for Hermès as it expands it customer base.

Thoughts?

Read more: Hermès Quarterly Information Report as at the End of March, 2022 

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