Hermès seems to be bucking the ongoing downturn in luxury spending, with the French luxury brand reporting increased sales in the U.S. and other global markets.
For the quarter that ended September 2023, the brand saw sales rise to $3.6 billion, marking a 15.6% improvement at constant exchange rates. In the U.S., sales increased by 20%, thanks to high demand on both coasts and at the brand’s newly opened New York flagship store. Meanwhile, sales improved by 18.1% in Europe as the continent continued to draw high volumes of tourists throughout the quarter.
And in China, the soon-to-be largest luxury market in the world, foot traffic at Hermès stores remained strong, helping the brand’s business bounce back in the months of July and August.
The brand registered a growth in sales across the glove even though it has raised its prices by roughly 7% this year to make up for high production costs. Japan, in particular, saw a double-digit price increase due to current fluctuations; on the opposite end of the spectrum, the U.S. saw a mere 3% increase.
“Despite an uncertain context, our outlook remains unchanged,” said Eric du Halgouet, Hermès executive vice-president of finance.
Hermès’ strong Q3 performance comes amidst a broader slowdown in the luxury segment, which has wiped off $245 billion in stock value for seven of the largest luxury brands in Europe over the past six months. LVMH stock, which is seen as a bellwether for the luxury market, has seen a 20% decline during the period.
In the U.S. market, luxury brands are expected to see a slowdown as student loan repayments will soon resume, and consumers are expected to run out of their savings by the end of the last quarter, according to the San Francisco Fed Reserve. Meanwhile, spending recovery in China, the world’s second-largest economy has been tepid as the country’s economy is reeling from its ballooning real estate crisis, declining foreign investment, and record unemployment rates.
While these factors are weighing heavy on the performance of most luxury brands, Hermès has once again proven that its business is more resilient during periods of economic downturns. That is largely due to the fact that the brand caters to high-net-worth individuals who can easily afford its products, such as the Birkin bag, which can cost tens of thousands of dollars.
Other players, such as LVMH, on the other hand, are more reliant on aspirational shoppers who seek to emulate the lifestyle and prestige associated with luxury brands despite not having the financial capacity to make frequent high-end purchases.