Hermès Shows Little Wear From Pandemic -- Heard on the Street
19 Febbraio 2021 - 3:51PM
Dow Jones News
By Carol Ryan
Even with no place to go to flaunt their purchases, wealthy
shoppers kept the tills ringing at Hermès during the coronavirus
pandemic.
Axel Dumas, the chief executive officer of the French maker of
$10,000 Birkin and Kelly handbags, said Friday that sales at
constant exchange rates fell 6% in 2020 compared with a year
earlier. Competitors LVMH Moët Hennessy Louis Vuitton and
Gucci-owner Kering both recently reported more severe declines of
16%. Hermès also had the best fourth-quarter performance across the
luxury sector to date. The brand's shares were up 6% in early
European trading.
In hard-hit categories where many of its competitors are
struggling, Hermès has bucked trends. Sales of the company's
watches increased by 28% in the fourth quarter. Compagnie
Financière Richemont, which makes Swiss watch brands Officine
Panerai and Jaeger-LeCoultre, said sales at its specialist
watchmakers division dropped 4% over the same period.
The growth is striking considering Hermès has one of the
stingiest ad budgets in the industry, spending just 5% of its sales
on marketing. Most of this goes on live events rather than media
campaigns. Less desirable luxury brands need to plough up to one
quarter of their turnover back into marketing to maintain sales
growth.
So far, Hermès hasn't resorted to the kind of aggressive price
increases that other brands used during the pandemic to offset
weaker volumes. Louis Vuitton lifted prices on certain handbags by
up to 6% in May last year, according to Jefferies data. At closely
owned Chanel, its best-known handbag is now around one-fifth more
expensive globally than it was at the end of 2019. Hermès'
management said it would only increase prices by around 1% in 2021
to offset the cost of higher wages.
All these indicators of healthy demand mean Hermès faces another
uncertain year in better shape than most of its luxury peers. The
brand has always starved the market of supply, particularly of its
coveted Birkin handbags. Shoppers often can't get their hands on
what they want, increasing the label's desirability.
After climbing close to 40% over the past 12 months, Hermès'
shares are trading at 63 times next year's earnings and well above
the company's 10-year average of 37 times. That is hardly good
value, but investors are assuredly getting good quality.
Write to Carol Ryan at carol.ryan@wsj.com
(END) Dow Jones Newswires
February 19, 2021 09:36 ET (14:36 GMT)
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