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Image: Hermès

Hermès reported an “exceptional first half” on Friday, with the French luxury goods stalwart citing its “sustainable and responsible model” as helping it to generate revenues of 4.24 billion euros ($5.05 billion) for the first 6 months of the year, up 77 percent compared to the same period last year and 33 percent compared to 2019 at constant exchange rates. For the second quarter of the year, the Birkin bag-maker reported that sales increased to 2.15 billion euro ($2.56 billion), up by 127 percent thanks to demand for its ready-to-wear and accessories offerings, as well as sales of watches and increased interest in its silk and textiles collection. 

Citing a “remarkable” increases across the board, Hermès revealed on Friday that sales for its ready-to-wear offerings grew by 98 percent on a YoY basis and 40 percent compared to the first half of 2019, while watches sales spiked by 121 percent compared to H1 in 2020 and 80 percent from 2019, which Hermès attributes to “the technical watch-making expertise and creativity of the collections, [and] the success of the new men’s watch Hermès H08.”  Still yet, Homeware and Jewelry sales were up by 100 percent in the first half of the year compared to H1 in 2020 and 92 percent from 2019, a nod to the fact that consumers have been outfitting their homes amid and in the wake of the pandemic. 

Sales by Category

Still yet, Leather Goods and Saddlery sales were up by 63 percent on a YoY basis and 25 compared to 2019, “driven by the significant deliveries made at the end of 2020,” and with demand being “sustained for the re-invented classics and new models such as the Hermès Della Cavalleria bag.” On this point, Hermès notes that its aim to “increase production capacities continues” with the opening of a new workshop in France scheduled for September, followed by new workshops in 2022, 2023, and 2024. Finally, a year after the launch of Rouge Hermès, the brand says that “has continued its development with the launch of Rose Hermès, a collection of blush and natural, refillable and sustainable lip enhancers.” Perfume and Beauty sales grew by 65 percent compared to 2020 and 17 from 2019

In terms of sales growth by region, Hermès reported that “all the geographical areas confirmed their strong growth with an acceleration in America and recovery in Europe.” The U.S. – which generates 16 percent of the group’s revenues – boasted the biggest uptick in sales for the first half of the year, growth of 115 percent YoY and 25 percent compared to H1 in 2019 “despite local constraints.” In Asia excluding Japan, which is responsible for 51 percent of sales, sales were up by 87 percent compared to H1 2020 and 70 percent from H1 2019, “were driven by the strong performance in Greater China and by the acceleration in sales in Singapore and in Thailand, despite new restrictions in some countries in the second quarter.”

Percentage of Sales by Category

All the while, the company revealed that sales in its increased by 81 percent at constant exchange rates compared to last year, and by 41 percent compared to 2019, while wholesale activities “bounced back (up 46 percent), but remained penalized particularly by [a lack of] travel retail.” Hermès says that it has continued to develop its network via new store openings in Troy, Detroit and Omotesando, Japan, and extensions, and with “growing” online sales worldwide, as it aims to provide “support for the digitization of uses and the rise of digital technology.” In a corresponding conference call, Hermès management stated that approximately 75 percent of online sales in H1 were from first-time customers, and without citing specific figures, revealed that all online metrics are on the rise.

In terms of profitability, Hermès consistently boasts stellar margins. “Thanks to the leverage effect generated by the strong sales growth, while controlling costs,” the group reported that its recurring operating margin reached 41 percent for the first half of the year compared to 22 percent at the end of June 2020. 

And finally, when it comes to sustainability and ESG, Hermès reiterated “its commitments to preserving natural resources, supporting local communities and reducing its carbon emissions.” Speaking of its increasing push towards leather alternatives, including its introduction of bags crafted from a material called Sylvania, which is a leather alternative made from mushrooms, Hermès management said in the analyst call on Friday that they “will have a very limited supply of the bag at the beginning and expect to have waiting lists for it, like other best-sellers. According to a note from Bernstein analyst Luca Solca, the strategy on this front is “simple – they aim to find the best product and material, [which will] need to be incredible and long-lasting so that it can be passed to the next generation.”

Looking ahead, Hermès stated that “the impacts of the COVID-19 pandemic are still difficult to assess [for the rest of 2021],” but stated that its “highly integrated craftsmanship model and balanced distribution network, as well as the creativity of [its] collections and [its] customers’ loyalty, give us confidence in the future.” Beyond that the group noted that “thanks to its unique business model, [it] is pursuing its long-term development strategy based on creativity, maintaining control over know-how and singular communication.”