Burberry, Hermès Signal U.S. Slowdown in Sales

Not even Hermès is immune from slowing luxury demand, according to its third quarter results. "Asian sales growth slowed to 1.5 percent in the third quarter, excluding Japan, from 6 percent in the second quarter as anti-extravagance measures in China weighed on spending, and sales in the Americas grew just 2 percent at constant exchange rates as stock market volatility and a strong dollar curb spending by locals and tourists," per Bloomberg.

Despite such results, Paris-based Hermès, which is known for its pricey Birkin and Kelly bags, still delivered revenue growth that matched analysts’ estimates, with total sales climbing 15 percent to 1.14 billion euros ($1.2 billion). Speaking about the house's results, Rogerio Fujimori, an analyst at RBC Capital Markets, said they indicate “a reassuring performance from Hermès against a more difficult backdrop in Asia and Americas. When things get tough, the best business models and most exclusive brands stand out.”

So, what is Hermès doing right? According to Bloomberg, "By keeping the supply of $9,400 Birkin bags limited, Hermes is weathering slowing luxury demand better than lower-priced competitors," such as Burberry Group, which reported sputtering sales growth in America, adding to the woes of luxury-goods makers already reeling from an Asian slump.

London-based Burberry, which recently announced that it will bring all of its labels together under one core Burberry brand/moniker, reported a drop in second-quarter sales in the U.S., the world’s biggest luxury market. According to Burberry Chief Financial Officer Carol Fairweather, "The region remains very volatile and quite difficult to read." However, Burberry’s first-half profit beat analysts’ estimates as Chief Creative Officer Christopher Bailey cut expenses. 

Per Bloomberg: Makers of high-priced jewelry and designer fashions are increasingly signaling a slowdown in the U.S. market, which Bain & Co. estimates is worth 79 billion euros ($85 billion). Globally, the luxury-goods industry is set to post its worst year since 2009 as a combination of stock market turmoil, a strong dollar and a commodity-price rout curb demand. While local consumption in the U.S. is rising, it’s not enough to offset a drop in demand from tourists, according to Bain. “China has not stopped buying luxury, but you really have to be targeting the right channels,” Virginie Maisonneuve, founder and managing director of Maisonneuve Global Advisors, said in a Bloomberg Television interview Thursday. “It’s harder than it was 10 to 15 years ago.”