Online Reporter
Hermès’ sales at the start of the year were hurt by a slowdown in Chinese demand, showing that even the most resilient purveyor of high-end goods wasn’t spared the slump in the luxury industry there.
First-quarter sales in Asia Pacific excluding Japan rose 1.2 percent at constant exchange rates, Hermès International SCA said in a statement Thursday, below the 4 percent gain analysts had expected. Overall, Hermès’ revenue in the period was slightly shy of analyst estimates.
The rare disappointment from Hermès — the maker of the coveted Birkin bag — comes as the luxury market is struggling to emerge from a period of sluggish growth caused in large part by Chinese shoppers reining in costly purchases.
The industry’s outlook has grown even gloomier since US President Donald Trump this month imposed 10 percent tariffs on imports from the European Union, while pausing plans for a 20 percent levy for 90 days.
Hermès will increase prices in the US as of May 1, Chief Financial Officer Eric du Halgouet said on a call with reporters.
“We will fully compensate the impact of these new tariffs” on all the product categories, he said, adding that the final pricing decisions are still being ironed out.
The performance in China was hurt by lower traffic in stores amid a property market downturn and also because of the higher basis of comparison from a year ago, he said.
Hermès has still continued to outperform rivals in part because it caters to the world’s wealthiest clients, whose spending habits tend to be less affected by economic downturns.
Hermès also enjoys strong pricing power and waiting lists for its top-line handbags, thanks to a managed-scarcity driven production model that boosts their exclusivity.
The company’s sales in the first quarter grew in all regions, with the Americas posting an 11 percent jump. — Bloomberg
