Handbag maker Hermes echoes luxury sales rebound amid online surge

MILAN (Reuters) - Hermes' HRMS.PA comparable sales picked up in the third quarter, rising 7%, and the Birkin bag maker said this positive momentum had extended into October after a strong rebound in Asia and surging online revenues.

FILE PHOTO: Residents, wearing protectice face masks, walk past a Hermes store in Paris, France, April 24, 2020. REUTERS/Charles Platiau

Luxury goods makers were hit hard by store closures during lockdowns to combat the coronavirus pandemic and sales for the industry as a whole are expected to fall by up to 35% this year - an unprecedented plunge after a decade of stellar growth.

But a gradual re-opening, even as governments bring in fresh measures to fight rising COVID-19 infections, has helped sales to recover. High-end labels, which used to be more reticent to sell their products online, have also seen web revenues surge.

Hermes - known for its $12,000-plus handbags like the Birkin, which often generates waiting lists - already sells a selection of leather goods online but said it would make a larger push.

“We are going to gradually increase our offer of products online, except for the very iconic products such as Birkin,” finance chief Eric du Halgoüet told reporters.

He said the online channel had now become the group’s “biggest store”, with revenues exceeding those of any of its flagship shops. Sales online grew by nearly 100% in all regions in the first nine months of the year.

Hermes shares have risen 20% since the start of the year despite the health crisis as the brand is traditionally seen as being more resilient in a downturn than rivals.

The shares were down 0.6% in early trade on Thursday, with the French blue-chip index dropping 1.3%

Hermes’ comparable sales, which strip out the impact of foreign exchange rates and acquisitions, came in at 1.8 billion euros ($2.13 billion) in the three months to end-September - making it the first luxury brand to post rising overall revenues in the third quarter.

Sales of leather goods grew 8% in the period while fashion sales were also up, echoing buoyant trends at Louis Vuitton owner LVMH LVMH.PA.

“Global luxury goods demand has materially revived over the summer, never mind the fact that intercontinental travel is still virtually nonexistent. Best-in-class companies are already producing year-on-year growth in 3Q20, much ahead of start of Covid-19 industry estimates,” said Luca Solca of Bernstein.

Third-quarter growth was strong in Asia, where lockdown restrictions were eased first, with sales up 25%, while revenues fell by 15% in Europe -- including a 23% drop in France -- and by 5% in the Americas.

Revenue from Hermes silk scarves were down 20.5% in the period. The group said that was due to an unfavourable comparison to a year ago and lower travel retail activity.

Du Halgoüet said the positive sales trend of the third quarter had continued into October and the group had not yet seen an impact from new restrictions imposed by European governments as contagion numbers rise again sharply.

But Hermes struck a cautious note for the full-year outlook, saying the impact of the Covid-19 epidemic remains “difficult to assess, as the scale, duration and geographic extent of the crisis evolve every day.”

Reporting by Silvia Aloisi, editing by Sarah White and Jane Merriman