Hermès Rides High With Increased Production and Chinese Demand

Hermès’ first quarter 2019 financial results are in and, no surprise, the legacy House is doing well. Quite well, in fact. The company reported its fastest sales growth in four years. If you’re wondering why, look no further than China and increased production.

Photo courtesy: @therealfashionblogger

Geographically, Hermès Executive Chairman Axel Dumas pointed to continued dynamic growth in the Chinese market. The area known as Asia excluding Japan grew 17%. Hermès says this was primarily driven by mainland China although the remainder of the region also posted double digit numbers. Contributing to the success were additional and expanded stores (in Shanghai IFC, Singapore Marina Bay Sands and Phuket Floresta, Thailand) and continued roll-out of the Asian digital platform.

Japan and the Americas also rose 10%, with Europe (excluding France) close behind at 9.5%. According to Hermès, sales in France were adversely affected by the 2018 protests that continued into the new year.

In terms of product lines, the Leather Goods and Saddlery group (which includes the handbags) showed 12.5% growth for the first quarter. The report states this was “driven by sustained deliveries” and “production capacity increased in order to meet the high demand” for both re-invented classics and new lines.

Long-standing Hermès customers have been talking about this for awhile. Many VIPs complain that bags are more available than they were in the past (at least for them, not for everyone). As we have discussed before, more bags translate to higher revenue. The delicate balance for Hermès is how to maintain exclusivity while making product available.

Also noteworthy, sales in the Ready-to-Wear and Accessories division rose 13%. Hermès states that its fashions were very well received in January and March.

Are you surprised that Hermès continues to soar? What do you think about the increased production of handbags? Let us hear from you.

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