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Image: Hermès

Revenues for Hermès were up by 42 percent at constant exchange rates to €8.98 billion in 2021, the French luxury goods reported on Friday, up 42% at constant exchange rates and 41% at current exchange rates compared to 2020. Recurring operating income grew by 78 percent to €3.53 billion and net profit reached €2.445 billion, up 77 percent compared to 2020. Meanwhile, sales slowed in Q4 of 2021, with leather goods sales lagging by 5.4 percent compared to Q4 in 2020, prompting the Birkin bag-maker to miss analyst expectations of 12 percent growth on sales for the 3-month period by one percent. Hermès cited “capacity constraints” for its in-demand offerings as the culpit. 

Looking at its annual revenues on a regional basis, Hermès reported that Asia and America recorded “the highest growths, compared to 2020 as well as to 2019,” while Europe returned to growth compared to 2019. Sales in the Asian region (not including Japan) were up by 45 percent compared to 2020 and 65 from 2019. In America, Hermès reported sales growth of 57 percent and 24 percent compared to 2020 and 2019, respectively, citing “a strong performance, despite the sanitary restrictions imposed in several US cities in the fourth quarter.” 

In terms of product categories, Hermès asserted that as of the end of 2021, all the business lines “confirmed their growth, with a noteworthy increase in Ready-to-wear and Accessories, Watches and Other Hermès Business Lines (Jewellery and Homeware).” As usual, Leather Goods and Saddlery division sales were “exceptional,” up by 29 percent and 23 percent from 2020 and 2019 thanks to sustained “demand both for new bags like Della Cavalleria and 24/24 and the Hermès classics.” 

Annual sales by product category

Ready-to-wear and Accessories sales were up by 59 percent and 44 percent from 2020 and 2019 “thanks to the success of the ready-to-wear, fashion accessories and footwear collections;” Silk and Textiles business line “performed well” with growth of 49 percent and 15 percent from 2020 and 2019; Perfumes and Beauty sales were up (+47% and +19% from 2020 and 2019); the Watches business line continued to grow (+73% and +77% from 2020 and 2019); and quite strikingly, “Other” Hermès business lines, which includes Jewellery and Homeware, the latter of which has performed particularly well amid pandemic lockdowns, were up by 57 percent and 95 percent compared to 2020 and 2019.  

Speaking about Hermès’ revenues on Friday, Executive Chairman Axel Dumas addressed the volume growth caps that exist for its leather goods offerings, which stand at 6 to 7 percent annually, with Hermès “preferring to have long waiting lists for its products rather than accelerate production,” per Reuters. Dumas said the group has no plans of changing that despite adding new employees each year and expanding production facilities. 

“It takes 15 hours [to create an] Hermès bag,” Dumas stated. “Even if there’s a lot of demand, I’m not going to start doing them in 13 hours to raise production.” 

As for the move by luxury players to boost prices over the past couple of months and going further in 2022, Dumas confirmed that Hermès boosted prices across the globe by an average of 3.5 percent, up from its customary 1.5 percent rise, in order to account for increasing production costs in Europe. He notes that the price hike also included “regional price adjustments to account for currency fluctuations.” Setting itself apart from rivals, Dumas stated that Hermès has no plans to increase prices in order to “boost its results,” and noted that “given its hand-crafted production, Hermès is less exposed than rivals to increasing costs of energy and primary materials.”

One more takeaway comes in the form of a spotlight on the U.S. A key focus for both Kering and Hermès in connection with their earnings and future growth is expansion within the U.S. On the heels of Jean-François Palus, Kering Group Managing Director, asserting that Kering has “a significant potential in second- or third-tier cities, and new pockets of wealth such as Atlanta or Nashville or even Austin,” Hermes boasted increases driven by sales in America (+57% and +24% from 2020 and 2019), and pointed to the opening of two new stores in Troy near Detroit in June and in Aventura Mall near Miami in October. This comes amid a 5-year expansion plan for the brand in the U.S., with new stores and renovations of existing stores, including a major revamp of its Madison Avenue store in New York.