While global markets are in turmoil, wealthy Chinese and European shoppers were forced to spend more on luxury clothing and accessories in the first quarter, surpassing market expectations by 23%.
A total of 3.38 billion euros ($3.74 billion) was generated in sales for the three months ending in March. Based on Visible Alpha's consensus estimate of 15% growth, the actual increase was 23%.
LVMH's finance chief earlier this week signaled softer fashion, leather, and jewelry demand in the United States. Eric du Halgouet told journalists Hermes stores are still experiencing high traffic in the States.
In April, we saw a very dynamic increase in (store) traffic globally, which was consistent with the trends we saw throughout the month.
“It is obvious that we remain vigilant in terms of macro trends, despite the fact that we have not yet seen a slowdown."
As a result, the group posted a 19% increase in American sales compared with LVMH's 8% growth in the region, said Bernstein analyst Luca Solca.
Despite adverse demand trends, Hermes has managed to overcome them through its high brand awareness and waiting lists for iconic products, according to the company.
“It's also probably helping that richer consumers are exposed to higher-end brands."
During the first quarter of the year, Hermes raised its prices by around 7%, a higher increase than the 2-3% it usually increases each year.
At the end of last year, lockdowns in China dented sales for many companies, but Hermes was less affected than most. Revenues in China grew by 23% during the quarter. More than half of the group's annual sales come from Asia excluding Japan.
In addition to Hong Kong and Macau, Du Halgouet said Singapore and Australia had experienced a surge in Chinese tourists, and Chinese shoppers would slowly return to Europe towards the end of the year.
Bain Consulting reported in February that stringent COVID lockdowns dampened luxury demand in China in 2018, resulting in a 10% drop, marking the end of a five-year growth streak.
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