Hermès Surges Past Expectations on US Demand and China Recovery

Hermès delivered encouraging news on Wednesday, reporting a robust third-quarter performance driven by a slight sales improvement in the crucial Chinese market and sustained strong demand from US shoppers for its ultra-luxury offerings.

The luxury giant's Q3 sales surpassed analyst predictions, rising 9.6% at constant exchange rates (or 4.8% on a reported basis) to reach €3.881 billion, exceeding the 9.3% forecast by some analysts. A key driver of this growth was the leather goods division, which accounts for nearly half of the company's total sales. This segment saw a significant 13.3% increase at constant rates, though this was marginally below estimates.

Axel Dumas, executive chairman of Hermès, commented on the results, stating, “In the third quarter, Hermès is maintaining its course, thanks to solid growth that reflects the strength of our model. We remain focused on navigating uncertainties, thanks to the loyalty of our customers and the commitment of our employees.” Eric de Halgouet, the finance chief, added that a "very slight improvement" was observed in Greater China during the third quarter, attributing this to positive developments in the local stock market and stable property prices in major cities.

The US market continued to demonstrate considerable strength across various product categories, with Eric de Halgouet also noting steady progress in store footfall. Despite a price increase implemented in May due to tariffs, Hermès has not adjusted prices since, and US sales climbed an impressive 14.1% at constant exchange rates (7.2% at actual rates), reaching €714 million for the quarter.

Geographically, Europe also contributed positively to the overall performance. Sales in France rose 10.4% to €403 million, while the rest of Europe experienced a 10.2% increase at constant rates (8.3% reported), totaling €633 million. In Asia, Japan saw sales grow by 13.8% at constant rates (8% reported) to €389 million. The rest of Asia Pacific recorded a 6.2% increase at constant rates, though only 0.3% reported, reaching €1.589 billion. The Middle East also showed strong growth, up 11.7% at constant rates (6.1% reported) to €154 million.

Beyond leather goods and saddlery, which reported an 8.1% increase on a reported basis to €1.7 billion, other product divisions also performed variedly. Ready-to-wear and accessories saw a 6.6% increase at constant rates (2% reported) to €1.157 billion, buoyed by well-received collections. Silk and textiles grew 4.1% at constant rates but dipped 0.7% on a reported basis, reaching €209 million. Watches, despite being down for the year as a whole, posted an 8.8% constant rate increase (4% reported) in Q3 to €131 million. However, the perfume and beauty segment saw a decline of 7.2% at constant rates (8.6% reported) to €118 million, primarily due to challenging comparisons from a significant product launch in the previous year.

The company highlighted that the strong performance of its leather goods division was fueled by robust demand for both its iconic products and new collections. Similarly, the ready-to-wear and accessories segments benefited from highly successful collections. The dip in perfume and beauty sales was specifically attributed to a tough comparative period, following a major launch in the prior year.