By Mimosa Spencer
PARIS (Reuters) – Birkin bag maker Hermes reported a 13 percent rise in second-quarter sales on Thursday, demonstrating a continued appetite among wealthy shoppers for its luxury handbags even as less affluent consumers pull back.
The French group's results come after a series of disappointing earnings updates from its rivals, including Dry (EPA:) and LVMH, which have raised concerns among investors about the uncertain outlook for the sector in the coming months.
Hermes' classic designs and strict production and inventory management have helped reinforce the brand's aura of exclusivity and made the company one of the top performers in the industry.
Chief Executive Axel Dumas told reporters the company had not seen “any major disruption in trends.”
“Iconic categories like leather goods continue to drive growth,” said Bernstein analyst Luca Solca, referring to 17.9% growth in the company's largest division, leather goods.
But Dumas said Hermes was seeing slightly less traffic from aspirational customers, which was impacting higher-volume products such as fashion accessories, including silk scarves.
This caused sales at the group's smallest silk and textiles division to fall 5.6% during the quarter.
The French luxury group's total sales rose to €3.7 billion ($4.02 billion), an organic increase of 13% excluding currency fluctuations. The figure was in line with analyst expectations, according to the Visible Alpha consensus.
First-half operating profit was €3.1 billion, compared to consensus provider Visible Alpha's forecast of €3.2 billion.
Sales in Asia Pacific excluding Japan rose 5.5% in the quarter, while those in Japan rose 19.5%, it said.
European luxury brands are benefiting from a surge in luxury sales in Japan, where tourists, especially Chinese, are taking advantage of the weak yen.
In China, a property crisis and job insecurity are weighing on the economy, denting demand for luxury goods after the country's rebound from a pandemic lockdown faded a year ago.
Dumas said the company's Chinese clientele continued to shop at home and, unlike its peers, business in Japan was driven primarily by locals, not tourists.
He added that Chinese customers are now looking for high-quality products, “not necessarily with logos”, a change that will benefit the group.
Consultancy Bain said last month that a preference for more discreet fashion was emerging in China as the country's wealthy sought to avoid flaunting their wealth at a time of economic austerity.
Dumas also highlighted the dynamism of the US market, which he described as a “big surprise.” Sales in the Americas rose 13% year-on-year in the second quarter, accelerating from the 11.8% growth in the first three months.
Hermes shares have risen nearly 6% since the start of the year, bucking a broader trend across the sector.
LVMH shares have lost almost 10%, while Kering, the owner of Gucci, has lost almost 30% of its value.
Earlier this week, LVMH missed quarterly earnings expectations, while Kering also missed forecasts. Kering said sales trends that worsened in June would continue in July.
(1 dollar = 0.9209 euros)
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