The most stable luxury brand? Hermès International Société en commandite par actions' stock price hits a new high against the trend.

Despite the global economic downturn, the overall growth of the luxury goods industry has slowed down in the past two years. However, it has been proven that top luxury brands still have strong performance resilience, and even "the more expensive, the better they sell".

On Friday, the performance announced by Hermès International Société en commandite par actions (Hermès), the French luxury goods group, showed a revenue growth of 18% in the last quarter, reaching 3.36 billion euros, exceeding market expectations. The demand for its handbags and clothing is strong in all global markets.

Hermès International Société en commandite par actions achieves a significant increase in performance against the market trend, and the stock price reaches a new high

Since 2022, due to the continuous surge in inflation in luxury goods sales centers such as Europe and the United States, the purchasing power of the middle class has been under pressure, and the performance of many luxury brands has been affected, and their stock prices have started to decline. However, Hermès International Société en commandite par actions has gone against the trend and reached new heights.

Looking at the whole year, Hermès International Société en commandite par actions achieved a sales volume of 13.43 billion euros in 2023, a year-on-year increase of 16%. The net profit reached 4.31 billion euros, with a significant increase of 28% driven by price increases across all product lines. The annual operating profit margin reached a historical high of 42%.

The company also announced a dividend of 10 euros per share and a bonus of 4,000 euros for more than 20,000 employees worldwide.

Axel Dumas, the CEO of Hermès International Société en commandite par actions, said:

In 2023, Hermès International Société en commandite par actions once again demonstrated its uniqueness and achieved outstanding performance in all fields and regions, even in a situation where the base was already high.

Investors were previously concerned that luxury buyers in the two major markets of the United States and China might reduce their purchases due to economic pressure, but Dumas pointed out:

We are confident in the Chinese market... and we believe that the trend in the United States will not be interrupted.

Luca Solca, an analyst at Bernstein, commented that Hermès International Société en commandite par actions achieved double-digit growth in its leather goods business in the last quarter, contrary to the usual downturn at the end of the year. Against the backdrop of confidence recovery and declining inflation, Hermès International Société en commandite par actions is another company that confirms the recovery momentum of American consumers. After the release of its performance, Hermès International Société en commandite par actions' stock price rose by 4.3% on Friday local time, reaching a record high with a market value of 228.4 billion euros and a forward P/E ratio of 48.6 times in the past 12 months. In comparison, its competitors LVMH Group had a ratio of 24.8 and Kering Group had a ratio of 16.5.

The more expensive, the better the sales: Luxury brands raise prices to harvest the rich

The resilient performance of Hermès International Société en commandite par actions is closely related to its top luxury status.

On Chinese social media platforms, there are many versions of the "luxury brand hierarchy", but no matter which version, Hermès International Société en commandite par actions is universally recognized as the "absolute king" at the top of the hierarchy.

The long-term cultivation of its ultra-high-end brand image, limited production and inventory, as well as its classic and unique product designs, give Hermès International Société en commandite par actions the confidence to continue raising prices.

In 2023, Hermès International Société en commandite par actions has already raised prices of its products by 7%, and it plans to continue raising prices by 9% in 2024. Executives of Hermès International Société en commandite par actions stated that most price increases are implemented at the beginning of the year, reflecting the input costs including labor and raw materials, as well as exchange rate fluctuations. At the same time, Hermès International Société en commandite par actions announced that it plans to increase the production of leather goods by 6% to 7% this year.

Although other top luxury brands have also continuously raised handbag prices after the pandemic, their brand value still cannot compare to Hermès International Société en commandite par actions.

Take another major French luxury brand, Chanel, for example. The official prices of its handbags are already close to those of Hermès International Société en commandite par actions, but the resale prices in the secondary market are relatively lower, indicating that the top end of the price range is still dominated by Hermès International Société en commandite par actions. Due to the extreme demand for brand positioning. The more the economic situation deteriorates, the more top luxury brands need to maintain their uniqueness and capture the hearts of the wealthy. Handbags like Birkin from Hermès International Société en commandite par actions, which are priced at over $10,000, can only be afforded by consumers who are immune to uncertain economic conditions.

Currently, the performance of luxury brands is becoming polarized. In addition to Hermès International Société en commandite par actions, LVMH Group also recorded a 10% revenue growth last quarter, slightly higher than the average level of 9% over the past 35 years. However, brands under the Kering Group, such as Burberry, Saint Laurent, Gucci, and Bottega Veneta, with relatively lower positioning, have experienced a decline in revenue.

Inflation has weakened the purchasing power and confidence of middle-class shoppers. Savings during the pandemic have been depleted, impacting mid-range luxury brands. On the other hand, ultra-high-end brands like Hermès International Société en commandite par actions and LV are better able to withstand the impact of economic slowdown.