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Hermes plans big price rises, says no sign of slowdown
Global Banking & Finance Review®
Company
By Mimosa Spencer
PARIS (Reuters) -Birkin bag maker Hermes flagged plans to hike prices by 5% to 10% in 2023 on rising costs and currency fluctuations, much more than in the past, after a sharp rise in sales over the third quarter with no signs of any slowdown yet.
Echoing upbeat comments earlier this month by rival Louis Vuitton owner LVMH, Hermes brushed off concerns that the industry’s post-pandemic boom could be cooling due to a looming recession, as U.S. shoppers took advantage of the dollar’s strength in Europe and China rebounded sharply.
“We will probably have price hikes between 5 and 10 percent,” Hermes executive vice president of finance Eric du Halgouet told reporters on Thursday, blaming increased costs and currency movements.
The company had so far been more conservative than peers, which have aggressively raised prices during the pandemic.
Hermes, which has waiting lists for its prized $10,000-plus handbags and limits production to maintain exclusivity, increased prices by around 4% this year and by 1.5-2% on average in previous years. That compares with double-digit price hikes at Chanel.
In another sign of confidence Hermes said it would accelerate a hiring drive in the second half, after adding 800 people in the first six months and increasing salaries for all European employees in July.
Sales for the three months ending in September came to 3.14 billion euros ($3.07 billion), up 24.3% at constant exchange rates, double analyst expectations for 12% growth according to a consensus cited by UBS.
In Asia, excluding Japan, revenues grew by 34% over the period, with China in particular rebounding strongly after a new round of COVID-19 curbs disrupted business in July and August.
“For the moment, we don’t see any sign of slowdown in any of our markets,” said du Halgouet.
The Hermes figures suggest that “high-end global luxury goods demand has yet to normalise,” said Luca Solca, analyst at Bernstein. The shares opened 3% higher.
($1 = 1.0222 euros)
(Reporting by Mimosa Spencer, editing by Silvia Aloisi and Elaine Hardcastle)
A luxury good is a product that is not essential and is often associated with wealth and exclusivity, such as designer handbags or high-end automobiles.
Currency fluctuations refer to the changes in the value of one currency compared to another, which can affect international trade and pricing strategies.
A price increase is when a company raises the selling price of its products or services, often due to increased costs or demand.
Market confidence is the level of optimism or trust that investors and consumers have in the performance of the economy or specific markets.
A hiring initiative is a strategic plan implemented by a company to recruit new employees, often in response to growth or increased demand.
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