The third report card of the luxury group in the first half of the year, Hermès recently released the latest performance data. In the first half of the year, group revenue rose 15% to 7.5 billion euros, up 12% at current exchange rates, beating analysts' expectations of 7.45 billion euros, operating profit rose 8% to 3.1 billion euros, net income increased 6% to 2.4 billion euros, and gross margin fell 1.6 percentage points to 70.6%, mainly due to unfavorable currency and inventories. Revenue in the second quarter surged 13.3% to 3.7 billion euros, beating consensus expectations of 3.65 billion euros.
In terms of sub-sectors, the revenue of the leather goods and harness division, in which platinum bags are located, increased by 19% to 3.215 billion euros in the first half of the year, the revenue of the clothing and accessories division increased by 15% to 2.16 billion euros, the revenue of the silk and textile division increased by 1% to 436 million euros, the revenue of the perfume and beauty division increased by 5% to 260 million euros, the revenue of the watch division recorded 308 million euros without growth, the revenue of the other division covering jewelry and furniture increased by 19% to 967 million euros, and the revenue of the other products division increased by 7% to 157 million euros.
In the second quarter, the revenue of the leather goods and harness division increased by 15.8% to 1.59 billion euros, the revenue of the clothing and accessories division increased by 13.3% to 1.10 billion euros, the revenue of the silk and textile division fell by 7.3% to 190 million euros, the revenue of the perfume and beauty division increased by 4.8% to 130 million euros, the revenue of the watch division fell by 6.2% to 140 million euros, the revenue of the other division covering jewelry and furniture increased by 11.3% to 460 million euros, and the revenue of the other products division increased by 10.6% to 83 million euros.
In the first half of the year, Hermès launched the new Della Cavalleria Élan and Kelly Mini Clouté leather bags, while the travel collection included the R.M.S. Cargo suitcases and weekend bags, at the Watches & Wonders exhibition in Geneva in mid-April, Hermès unveiled the new collection Hermès Cut, a sporty piece that has been recognized by the watch industry. However, analysts believe that the drive of silk and textile products to sales is slowing, which indicates that Hermès is still under some pressure in the current tough market environment.
In January this year, the price of Hermes' entire line of products was raised, with a global average increase of 8%-9%, but compared with LV, Chanel and other brands adjusting prices three times a year on average, Hermes is more restrained in price increases. Hermès said that the group's pricing strategy remained coherent, and its restraint in its price increase strategy proved to be the right decision. The Group will only increase prices in two cases, one is the increase in production and personnel wage costs due to inflation, and the other is fluctuations in regional market exchange rates. In the future, the group will continue to adjust prices at its own pace.
By region, revenue from the European market surged 15.6% to 1.65 billion euros, Japan revenue surged 9% to 690 million euros, revenue from the Asia-Pacific market excluding Japan increased by 6.8% to 3.52 billion euros, revenue from the United States market increased by 12.1% to 1.33 billion euros, and revenue from other markets including the Middle East soared 105% to 310 million euros. In the second quarter, revenue from the European market surged 17% to 890 million euros, Japan revenue increased by 7% to 340 million euros, Asia-Pacific excluding Japan revenue increased by 4.4% to 1.6 billion euros, United States revenue increased by 13.7% to 720 million euros, and revenue from other markets including the Middle East increased 100% to 150 million euros.
Hermes said in its earnings report that except for Asia, which is affected by the fluctuation of passenger flow in the Chinese market, the rest of the world is showing strong momentum. Regarding the slowdown in the growth of the Asia-Pacific market in the second quarter, including China, Hermès explained that after the first quarter of the Lunar New Year, the traffic in the Chinese market declined, and the Asia-Pacific market performed well after the epidemic in the second quarter of last year, and this year's growth was also affected by a high base. Axel Dumas, executive chairman of Hermès, said that the number of enterprising consumers, especially Chinese consumers, has declined. But he also pointed out that despite the challenges in China's luxury market, consumers are more focused on quality than reputation.
Hermès has opened two stores in Japan since the beginning of this year, following a new store in Azabudaiyama, Tokyo in February, and a new store in Ginza, Tokyo in June. In June, Hermès reopened its Lee Gardens store in Hong Kong after an expansion, following the reopening of the renovated Beijing SKP store in May. In April, the Jio World Plaza store in Mumbai opened, which is also the third Hermès store in India.
After the earnings report, Hermès's share price rose 4.3% from the previous trading day to 2,093 euros per share, with the latest market value of 217 billion euros. In the past 12 months, Hermès shares have risen by 9.2%. Barclays analysts said in a note that even Hermès is not immune to the challenges of its competitors and is not immune to weak demand, but analysts believe that Hermès has a more resilient business model than its rivals. UBS analysts also said that although Hermès was not completely immune to weak demand and revenue growth in the Asia-Pacific market slowed, the group showed resilience in the second quarter.
Judging from the financial reports of the three luxury groups released this week for the first half of the year, the industry generally believes that because Hermes products have their own hard currency attributes and have a more affluent customer base, the group can outperform the industry and be in the upstream position of the industry. In contrast, Kering has fallen into trouble due to the stalling of its core brands, and its overall performance has lagged behind the industry, with Kering's revenue in the first half of the year plummeting 11% to 9 billion euros, and its operating profit nearly halved, falling 42% to 1.6 billion euros, and the group has issued a profit warning, and it expects operating profit to continue to fall by about 30% in the second half of the year. Previously reported: Kering's performance is red light: Gucci led the decline, BV was the most resistant to falling, and stocks fell the worst
Even LVMH, the world's largest luxury goods group, began to slow down, with first-half sales falling 1% to 41.7 billion euros, falling short of analysts' expectations of 42.2 billion euros, operating profit falling 8% to 10.7 billion euros and net profit plunging 14% to 7.3 billion euros. Previously reported: LV's parent company handed over the report card for the first half of the year, and Chinese consumers became a "conspicuous bag"
Citibank analysts previously said that Hermes is expected to surpass LV in the next few years to become the highest-grossing brand in the luxury industry, and expects Hermès' sales to reach about 20 billion euros in 2027 or earlier, comparable to LV's sales in 2022.
Written by: Nandu reporter Wang Xin