You may not have secured a new Hermès Birkin or Kelly over the last year, but that didn’t stymie Hermès’ soaring financial results. “Exceptional,” “remarkable”, “dynamic” – were all used by Hermès to describe its financial performance in the first half of 2021. With sales increasing nearly 33% worldwide over the same time period in 2019, few would disagree. But — and there is a but — the Company warns not to expect the continued rate of growth, at least not for the Leather Goods and Saddlery Division responsible for our favorite handbags.
As we’ve written several times before, despite the global pandemic and its economic impact, high end luxury goods are hot. And we don’t mean stolen… although there are plenty of instances of that as well. Even when boutiques were shuttered virtually worldwide, production facilities closed, supply chains interrupted, Birkins and Kellys sold like hotcakes on the secondary market.
So, it’s no surprise that as life reopened (and then closed and reopened again), Hermès products flew out of its boutiques and e-commerce sites. Leather Goods & Saddlery revenues rose just about 25% over 2019 (with constant exchange rates). In case you’re curious, that’s 63% over 2020, though a much less meaningful comparison
During the presentation of results, Axel Dumas, Executive Chairman of Hermès, stated that this level of growth for Leather Goods is not expected to continue. The Company targets 8% annual growth. The 2021 first half numbers were bolstered by excess inventory from year end 2020 that sold in 2021, essentially a catch up in sales.
Interestingly, and perhaps a swipe at luxury purveyors Chanel and Louis Vuitton, Mr. Dumas pointed out that Hermès’ revenue success was not due to jacked-up pricing. In fact, he said that the results came with only “limited price hikes.” As you no doubt recall, both Chanel and Louis Vuitton repeatedly raised prices substantially during the pandemic.
RTW and Accessories boosted 40.1% from 2019’s number. And the revenue in “Other Hermès Sectors” – which is home to, well, Home and Jewelry – skyrocketed 92.1% over 2019. Apparently, we were all redecorating à la ‘Chez Hermès’.
Geographically, there were few surprises. Asia (not including Japan) was particularly strong with a 69.7% increase in revenue over 2019. Asia as a whole was up 58.5%. With tourism at a standstill, these Hermès fans shopped at home.
The Americas also were strong, showing a 25.3% increase. France and Europe were on the negative side, no doubt due to the occurring and recurring shutdowns, and the lack of tourists.
Additionally, Hermès notes that, despite the pandemic, it continued to open new and redesigned stores and bring online new production facilities. It added nearly 400 people to its workforce in the first half of 2021, reasserted commitments to preserving resources, supporting local communities and reducing carbon emissions.
And for you beauty lovers, the next frontier… is hand care.
In Hermès own words, per Mr. Dumas:
“The results for the first half of the year have been exceptional in nature. But this performance also reflects the momentum and resilience of our model, which puts people, the source of creativity and innovation, as well as the requirement for absolute quality, at its core. These are the key factors of our artisanal approach and the desirability of our objects. We are equipped to cope with uncertainties while remaining faithful to our values.”
For 2021, the impacts of the COVID-19 pandemic are still difficult to assess. Our highly integrated craftsmanship model and balanced distribution network, as well as the creativity of our collections and our customers’ loyalty, give us confidence in the future.
Nevertheless, Mr. Dumas reminded listeners of the “uncertainties” present in the world, pledging that Hermès would continue the journey. Perhaps not coincidentally, this year’s Hermès theme is “The Odyssey.”