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Abu Dhabi, UAESunday 28 February 2021

Strong performance in Asia pushes Hermes sales up 16%

The company's shares surges by more than 6% in Paris on Friday

Customers queue in front of the Hermes store in Paris. AFP
Customers queue in front of the Hermes store in Paris. AFP

Birkin bag maker Hermes weathered the coronavirus pandemic better than its luxury goods rivals, with sales recovering sharply in the final part of 2020 thanks to a strong performance in Asia and soaring online revenues.

The French group said on Friday sales in the October to December period rose by 16 per cent at constant exchange rates - better than the 8 per cent increase forecast in an analyst consensus cited by UBS.

Shares in the group, which have surged 41 per cent in the past year despite the global health emergency, rose by more than 6 per cent in early trade in Paris on Friday.

Revenues in the last three months of 2020 rose by 47 per cent in Asia, with China, South Korea and Australia driving the rebound.

Profitability was also better than expected, particularly given that Hermes, unlike most rivals, said it had not increased prices in 2020. The gross margin increased to a record 37 per cent in the second half of the year.

"Hermes benefits from top desirability across borders, and long waiting lists on its iconic products," said Luca Solca, luxury goods analyst at Bernstein.

"The bigger difference with weaker peers is not only better performance in Europe, but also a significantly stronger rebound in Asia."

For the whole of 2020, revenues at constant exchange rates declined by just 6 per cent to €6.39 billion ($7.7bn), the best performance so far in the luxury goods sector, which has been hit hard by store closures and a lack of tourist flows due to the coronavirus pandemic.

"The absence of tourists was offset by the loyalty of our local customers and a strong increase in online sales," Hermes' executive chairman Axel Dumas told reporters.

He declined to elaborate on what proportion of overall sales had taken place online but said e-commerce had doubled or more in all regions and online sales had gone well even after stores reopened.

Sales in the Americas region were flat in the fourth quarter compared with a year ago. Europe was hampered by new store closures and lockdowns imposed from November to contain a resurgence of infections, with sales falling 10 per cent.

Published: February 19, 2021 04:46 PM

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