Image: Hermès

Hermès showed no sign of slowing in 2022, with the Birkin bag-maker reporting revenue of 11.6 billion euros ($12.41 billion) for the year, up 29 percent at current exchange rates and 23 percent at constant exchange rates compared to 2021. Annual recurring operating profitability reached a record 40.5 percent of sales (for a total of 4.7 billion euros ($5.03 billion)) up from 39.3 percentin 2021, while net profit (group share) reached 3.37 billion euros ($3.60 billion), representing net profitability of 29 percent. In Q4, alone, sales reached 2.99 billion euros, an increase of 26 percent at current exchanges rates and 23 percent at constant exchange rates. 

As of the end of 2022, Hermès reported that “all the business lines confirmed their high levels of sales, with Ready-to-Wear and Accessories, Watches, and Other Hermès business lines” – namely, jewelry and homewares – “posting a remarkable increase, reflecting the huge desirability of the house.” The Leather Goods and Saddlery business line “performed particularly well,” according to Hermès, with sales up by 16 percent year-over-year, aided by increasing expansion on the production front. (The company says it will open two new leather goods workshops this year in Normandie and Ardennes, noting that the projects for three new workshops sites are also ongoing.)

Hermès revenue by category

Meanwhile, Ready-to-wear and Accessories sales grew by 36 percent “thanks to the success of the ready-to-wear, fashion accessories and footwear collections;” Silk and Textiles sales were up by 20 percent for the year, “supported by the growth in production capacities and the success of the collections;” Perfume and Beauty sales grew by 15 percent, and Watches are up by 46 percent. 

Geographically speaking, a couple of regions stood out …

Asia excluding Japan (+22 percent), which “remained very dynamic throughout the geographical area.” Sales performance in Greater China was sustained. In October, a fourth store opened in the Qiantan district in Shanghai, Mainland China, and Hermès inaugurated a store in Pangyo, in South Korea. Several stores reopened after renovation and extension work, such as the Hyundai Coex store in Seoul in December and the Hong Kong international airport store in November. 

The Americas (+32 percent) saw an exceptional year in 2022. After the April opening of a new store in Austin, a new maison was inaugurated at 706 Madison Avenue in New York in September, and in Mexico, the store in Guadalajara reopened in October after renovation. 

Hermès revenue by region

In a call with analysts on Friday, Hermès management said that they saw “no breaks from previous trends,” stating that consumers are travel, and while tourism is ramping up, it is focused on local sales, particularly in light of the fact that its most valuable clients are routinely spending close to home. As such, Hermès management has no plans to create regional price gaps to specifically drive sales among tourists. 

Reflecting on customers in the U.S. and China, Hermès CEO Axel Dumas told analysts that it has benefitted from a dynamic “middle-class,” which consists of consumers who are “richer, more numerous, and younger” than before. Bernstein analyst Luca Solca cited Dumas in a note on Friday as describing this class of consumers as “look[ing] for a more diversified range of products (tableware to receive guests, jewelry as a gift for oneself, etc.)” and not just handbags. 

Speaking of handbags, Dumas said he was pleased with the 16 percent growth for Hermès’ Leather Goods division, which generated 4.96 billion euros ($5.30 billion) in revenue for the year. Dumas “highlighted the strong demand and acceleration in production capacity,” per Bernstein, and “confirmed that they have no intent to limit the production capacity of bags” and that they “do not create artificial selectivity through lower product quantities.” As for the brand’s most sought-after bags (i.e., Birkins and Kellys), Dumas addressed availability on Friday, stating that “some customers” – presumably those that send enough on non-handbags offerings – “can reserve bags,” while at the same time, “there are a portion of bags that are made available during the day so that everybody has an opportunity to get a bag.”

He further stated, “We certainly don’t try to hold things back, [particularly because] our bags are a great way of winning over new customers,” and sometimes, it “can be a question of … luck if you are at the right place, at the right time, you can get your hands on a bag.” 

On the resale front, Dumas noted that Hermès has “a problem in [its] stores” in that it has “genuine customers, who want to buy the bags for themselves” – who are the individuals he says that Hermès “wants to sell to” – but there are others that purchase purely with the aim of reselling the bags at higher prices outside of Hermès’ authorized distribution channels. This raises the question in its stores of whether bag-buyers are genuine customers or simply distributors looking to resale, with Dumas saying that there is “some ambiguity.”  

Dumas claims that when it comes to unauthorized resale, Hermès is the “number one victim of this,” and customers can be victims to some degree, as well, because “sometimes they may end up buying a fake bag or buying a bag elsewhere at a higher price than they would have paid in our stores.” With this in mind, the company’s CEO maintains, “We want to make as many bags as we can and have as many people as possible being able to buy them.” 

Finally, questioned about repairs, Dumas says the company did 202,000 repairs in 2022, claiming that this is an important initiative for him and the company.