Hermes continues to outshine rivals with Q3 sales up 11.3%
Adds China, analyst, quotes, in paragraphs 3,4, 8-11
By Mimosa Spencer
PARIS, Oct 24 (Reuters) -Birkin bag maker Hermes HRMS.PA reported on Thursday a hefty rise in third-quarter sales, continuing to outshine rivals hit hard by a downturn in China as its luxury handbags lure wealthy shoppers.
The French luxury company generated 3.7 billion euros ($3.99 billion) in revenue for the three months ending in September, an 11.3% rise at constant exchange rates, in line with an analyst consensus estimate cited by Jefferies.
The group said it was sticking with medium term guidance of revenue growth at constant exchange rate despite global economic, geopolitical and monetary uncertainties, adding that it would continue recruiting.
"We see Hermes as the best current opportunity to protect the portfolio from a difficult (second half of 2024) — suffering from a global cyclical slowdown exacerbated by structural issues in China," said Bernstein analyst Luca Solca, noting that all divisions, except watches, posted higher growth than expected.
A sector-wide slowdown has affected labels across the high-end spectrum, butHermes' famously classic designs and tight management of production and stock have helped reinforce the label's aura of exclusivity and made the company one of the most consistent performers in the industry.
Handbags like the coveted $10,000 plus Birkin model are affordable only for the wealthiest shoppers -- who are typically the more immune to choppy economic conditions.
INVESTING IN CHINA
The slowest growth came from the Asia Pacific region, excluding Japan, where sales were up 1%. The performance was fairly homogenous throughout the region, Eric du Halgouet, executive vice president finance for Hermes, told journalists in a call.
"In China, there hasn't been an interruption in trends, we're still facing the lower traffic that started after the Chinese New Year but there hasn't been an additional decline," said du Halgouet.
He added that Hermes was compensating for the lower traffic with higher average baskets, selling jewelry products, leather goods and ready-to-wear for men and women.
Du Halgouet said the group will continue to invest in China after inaugurating a store in Shenzhen's Mixc shopping mall on Wednesday, with plans for a new flagship in Beijing next year.
Hermes shares have risen nearly 9% since the start of the year, outpacing rivals, with LVMH down nearly 15%, Moncler down 3.3% and Kering PRTP.PA, which is working to turn around Gucci, down 40%.
Luxury bellwether LVMH missed expectations last week and flagged a drop in Chinese consumer confidence to COVID-era lows, with a deterioration in demand for fashion over the quarter.
Late on Wednesday, Kering PRTP.PA warned its 2024 operating income would almost halve to its lowest in years as weak demand in China deepened the struggles of the French luxury goods group's main label Gucci.
Showing limits of its resilience, executives earlier this year said that Hermes was seeing slightly less traffic from aspirational clients, impacting higher volume products like fashion accessories such as silk scarves.
($1 = 0.9267 euros)
Luxury stocks have been hit by China concerns https://tmsnrt.rs/3BXj8uj
Reporting by Mimosa Spencer, Ingrid Melander; Editing by Emelia Sithole-Matarise, Josephine Mason
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