In the first half of the year, Hermès International made more money than ever before. The company that makes the Birkin bag, which costs more than $10,000, was the best performer in the luxury industry.
The shares of the French company went up as much as 8.5% after it said that its recurring operating margin had reached a new high of 42%, up from 41% the year before.
Analyst at Sanford C. Berstein Luca Solca wrote in a note that the results were like “fireworks” and showed that Hermès is likely to be the most resilient luxury goods player in a recession.
At the same exchange rates, sales went up 20% to €2.71 billion ($2.77 billion). Analysts had thought that the stock would go up by 13%.
Hermès’s plan to branch out has also helped the brand, which has been known for its leather goods and saddlery for a long time. During the second quarter, this was the only division that grew by less than 10%. The watch division did the best, with a growth rate of 49%. The popularity of its Heure H model was a big part of this.
Price Increases
All of the brand’s prices went up by an average of 3.5% in January. Earlier this month, Axel Dumas, the brand’s executive chairman, told reporters that prices for watches and jewelry went up by between 3% and 5% because the price of gold was going up.
After being hurt by virus restrictions and store closings in April and May, sales in China came back “very strongly” last month, said Dumas. During that time, this area grew the least. In contrast, Europe grew the most, with France in particular getting a big boost from tourists, he said.
Hermès’ strong results follow those of LVMH and Kering SA, which show that the luxury consumer has so far been able to deal with high inflation and worries about a possible economic downturn.
The luxury brand best known for its Kelly leather bag is constantly opening new factories in France to keep up with rising demand. In Hermès’ home country, five new workshops will open in the next five years.
Dumas said that the company wants to increase the number of bags and other leather goods it makes by an average of 7% per year. This means that it is always looking for new people to work in its workshops.
Due to rising prices, Hermès gave its European employees a €100 gross monthly pay raise at the beginning of this month. That comes after a pay raise of the same amount for its workers in France earlier this year and a special €3,000 bonus paid to all employees around the world in February.
