Hermès Posts First Quarter Growth, Continues to Defy Industry Norm

While it seems that most luxury brands are struggling to consistently report significant positive growth, Hermès continues to defy the norm. The Paris-based luxury house posted robust growth in the first quarter, outperforming peers as the wider industry demand continues to cool. Last week, the family-owned brand, known for its Birkin and Kelly bags, said sales rose 19% to €1.1 billion ($1.2 billion) in the first three months of the year, compared with €944 million in the same period last year. Excluding currency effects, sales rose 8%, marking a slight deceleration from the previous quarter when growth reached almost 10%.  Such growth consisted of a a 9.6% rise in sales, at constant currencies, in China, double-digit sales growth in Japan, 4.6% growth in Europe and 9.6% growth in the U.S. The company didn’t disclose profit figures for the period.

According to WSJ, LVMH Moët Hennessy Louis Vuitton SA, which owns an array of brands including Christian Dior, Givenchy, Celine, Loewe and Marc Jacobs, has made extensive efforts to revamp its key Louis Vuitton brand after demand faltered in 2013. However, a direct correlation to profit increases has been slow. In the first three months of this year, LVMH’s fashion and leather-goods division—which is dominated by its namesake label—"remained subdued, rising 1% on a comparable basis to €3 billion." Rival conglomerate Kering, parent company to Bottega Veneta, Balenciaga, Alexander McQueen, Yves Saint Laurent and Stella McCartney, has also suffered of late, with sales at its luxury division falling in the first quarter, excluding currency effects. At Italian fashion house Prada, focus this year has turned to cutting costs and winning customers back with better services—such as made-to-measure—after profits plunged in 2014.

While Hermès hasremained one of the strongest performers of the European luxury goods sector, especially in comparison to most of its competitors, it is worth noting that the house expects growth to cool slightly in 2015. In fact, in February, Hermès lowered its annual sales growth target for the first time in years to 8 percent from its traditional level of 10 percent. The brand revealed that its adjusted target reflects its bigger size and overall industry downturn combined with potential hits from currency swings. More to come ...