Luxury-goods giant Hermes is crushing it, despite Covid wreaking havoc on shopping in China. The French company reported a 23% increase in sales in the fourth quarter, exceeding analyst predictions of a 17% growth rate. The leather goods and saddlery division, which includes the Birkin bag, experienced a 25% increase in sales.
Hermes's sales for the year hit a record EUR 11.6 billion ($12.3 billion), up 29% from EUR 8.98 billion the previous year, and its recurring operating income was EUR 3.4 billion. Despite other luxury groups struggling, Hermes sales in the Asia-Pacific region (excluding Japan) rose by about 25%.
Executive Chairman Axel Dumas is confident in the company's outlook for 2023 and awarded all 19,700 employees a EUR4,000 bonus. Hermes is meeting the high demand for Birkin and Kelly bags by opening new manufacturing plants in France, but even with the expansion, the waitlist remains long.
Hermes implemented an 8% product price hike in France and 7% globally in January making its products more exclusive. The company opened a 1 881 square metre store on New York's upmarket Madison Avenue district.
As you can tell, I like the luxury sector for long-term investments. Hermes is attractive because it enjoys the margins of a tech firm, with virtually no competition in the ultra high-end luxury handbag sector. They've mastered the art of keeping their bags elusive and out of reach.