Hermes results show luxury rebound

Rebounding luxury goods sales in Mainland China and improvements in Hong Kong have boosted third-quarter Hermes results.

Analysts are pointing to these and last week’s strong Kering numbers in tipping the worst may now be over for both luxury markets.

Hermes reported overnight that sales climbed to 1.26 billion euros (US$1.4 billion) in the last quarter, ahead of estimates.  Sales growth was strongest in Asia-Pacific, up 14 per cent and fuelling a global increase of 8.8 per cent excluding currency fluctuations. That’s the fastest growth rate in two years in the region.

“The driving trend is that the Chinese customer is slowly coming back,” Makiko Zuercher, who manages the Dynapartners Luxury Brands Fund, told Reuters.

Chinese customers are the most prolific buyers of luxury goods globally, accounting for about one third of demand. Luxury brands say their return to stores has been driven by government policies encouraging domestic consumption.

“China is growing at a better pace, mainly because the economy is strengthening and because of domestic consumption,” Hermes CEO Axel Dumas told journalists in a conference call. “In our case, I’m not talking about a rebound, because we always had growth.”

Hermes’ sales of leather goods rose 16 per cent, with the $9000 Constance purse and $5000 Halzan shoulder bag leading the way.

After reporting growth of 7.7 per cent for the first nine months of the year, Hermes is predicting full-year growth of just under 8 per cent, a target analysts expect it will exceed.

LVMH and Richemont have also reported improvements in Asian sales in recent weeks.