Hermes sees strong demand in China over fourth quarter
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Hermes sees strong demand in China over fourth quarter

According to prestige luxury brand Hermes, best known for its leather goods like the exclusive Birkin handbag, which sell at auction for as much as hundreds of thousands of dollars, Chinese demand for luxury is holding firm. The company released positive earnings at the end of last week that demonstrated a strong underlying business. And, in very reassuring news for luxury investors across the board, Hermes said it wasn’t seeing any dry up of luxury demand in China.

Hermes’s share price has appreciated by 12% so far this year

graph 12 hermes

Source: Yahoo Finance

There’s a reason luxury brands keep talking about China – the country accounts for more-than a third of luxury sales worldwide! And, as China’s transformation continues, that number is growing along with its burgeoning middle class. However, recent concerns over a slowing economy and a trade war with the US had investors worried: would luxury’s eastern growth engine falter? According to Hermes, the answer to that is no. And in delivering it, they join other prominent luxury companies in asserting that the country is holding up ok (such as LVMH – see our Luxury Fund Manager’s opinion on the company’s earnings here).

Revenues in the fourth quarter (and the year as a whole) rose by 10%, year on year. In Asia, excluding Japan, sales were up by 13.1% at constant currencies against the fourth quarter of 2017 – that’s a significant pick up from the third quarter’s 11.7% growth reported on the same basis.

Asia made up 46% of revenue in the fourth quarter of the year, and Hermes is pursuing an expansion there. The company’s CEO, Alex Dumas, said “we are still growing strongly in Asia, we did not see any change in momentum in our stories in China,” and noted that Hermes was planning to roll out its online business to new Asian countries. He didn’t say where, but we might see further details on March 20, when the company releases full earnings.


Dominion holds Hermes in its Global Trends Luxury Fund.

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