Luxury brand Hermes flags strong rebound in China with record margins

hermes flags strong china rebound

Sales at Hermes, makers of the Birkin Bag, rose sharply in the second quarter, lifted by fast growth in the United States and Europe, rebounding strongly in China in June.

Following lockdowns in China in April and May, the French leather goods firm, also known for its silk scarves with equestrian prints, said that sales bounced back in the last month of the quarter.

Luxury retailers were walloped by curbs on movement in key Chinese cities such as Beijing and Shanghai. Most reported an over 30% drop in sales in the nation—a critical market for the industry—over the quarter.

In a call with the press, Axel Dumas, Hermes’ Executive Chairman, declined to give a figure for the group’s Chinese sales in the quarter but said they had fallen less than the levels reported by rivals. Dumas said the June rebound had not fully offset the decline in April and May.

The luxury group’s overall sales in the three months to June came to 2.7 billion euros ($2.76 billion), a 19.5% rise at constant exchange rates, which strips out currency fluctuations.

Hermes elevated operating margins to a record 42% in the first half of 2022, the highest level in the industry and a considerable achievement given that Hermes has in recent months raised prices less than competitors such as Chanel and LVMH.

Traditionally regarded as particularly resistant to downturns, it has long been one of the steadiest performers in the luxury goods industry, partly due to its careful management of stocks and production, which have helped maintain its aura of exclusivity.