Hermes International sales jumped in the first quarter as consumers spent more on the company’s ready-to-wear clothing and leather bags.
Revenue rose 27% at constant exchange rates to 2.77 billion euros ($3.02 billion) in the first three months of the year, the Birkin bag maker said in a statement Thursday. Analysts had expected a gain of 15%.
The standout performer was the ready-to-wear line which grew 44%, more than double estimates. Growth at its biggest leather goods and saddlery unit also beat expectations. Shares rose as much as 4.6% in early Paris trading.
As of Thursday, three of the company’s 26 stores in China were closed due to lockdowns. The three stores are in Shanghai, Chief Financial Officer Eric du Halgouet told reporters in a call. The activity in China was buoyant between the start of the year until the shutdowns arrived late March, he said, adding that "the fundamentals are exceptional in China.”
To boost production, Hermes announced last month plans to open two new leather goods workshops in France for 2025 and 2026, which will create 500 jobs. That’s on top of three other sites scheduled to open in the next 3 years to address supply constraints. Hermes is still aiming to increase leather goods volumes between 6% and 7% a year, du Halgouet said.
Hermes is in close contact with its staff in Russia where its three Moscow stores shut down last month following the invasion of Ukraine, du Halgouet said.
Russia represents less than 1% of total group sales, he said. The company had planned to open a store in St. Petersburg in June, but that’s now suspended, he said.
Hermes already implemented price increases of 3.5% on average at the start of the year amid inflation pressures, and may increase prices for its jewelry and watches lines in the middle of this year to offset rising costs of precious metals, du Halgouet said. He expects higher prices in 2023.
Hermes results follow those of rival European luxury goods maker LVMH earlier this week which warned analysts the lockdowns in China were having a negative impact on sales even though it didn’t quantify the drop.
