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It\u2019s been tricky to get a read on how luxury spenders have been thinking lately\u2014sales slowed for the likes of French behemoth LVMH mid-last year, and then bounced back<\/a>, while Gucci-owner Kering has struggled to clock in growth<\/a> during the same period.\u00a0<\/p>\n But one company has managed to defy a perceived slowdown<\/a> in the luxury industry, as shoppers appeared to finally succumb to inflationary pressures after they spurred rapid growth during COVID-19 lockdowns.\u00a0<\/p>\n Paris-based Herm\u00e8s, which sells its high-end bags and accessories into a broad global market, was the rare outlier when it beat analyst expectations<\/a> in the third quarter of 2023 while its rivals were reeling from easing spending.\u00a0<\/p>\n It continued to see strong demand towards the end of 2023, with sales surging 18% to \u20ac3.36 billion ($3.62 billion) in the last three months of the year in constant exchange rate terms, Herm\u00e8s said in its earnings report Friday<\/a>.\u00a0The group\u2019s full-year revenue was up 21% compared to 2022.<\/p>\n \u201cThese solid results reflect the strong desirability of our collections and the commitment and talent of the house\u2019s women and men,\u201d the company\u2019s executive chairman Axel Dumas said in a statement.\u00a0<\/p>\n All of Herm\u00e8s\u2019s key segments\u2014from leather goods to silk and textiles\u2014grew over 10% in the fourth quarter. The brand also recorded strong performances in regions like America that have been pain-points for other luxury players.<\/p>\n Seeing as consumers continue to opt for Herm\u00e8s\u2019s luxury goods despite a cost-of-living crunch, the brand is looking to press on with price increases of 8% to 9% globally in the current year, Dumas told reporters, according to Reuters<\/a>.\u00a0<\/p>\n The maker of Birkin and Kelly bags has resorted to price increases for several years now\u2014even before 2023 kicked off, Herm\u00e8s\u2019s CFO Eric du Halgouet announced an increase in prices by 5-10%<\/a> as a way to hold on to pricing power amid consumers\u2019 unyielding appetite for its luxury goods. Other luxury brands often hike prices as a way to offset elevated manufacturing costs<\/a> or to double-down on high-performing<\/a> segments.<\/p>\n The French luxury company\u2019s results come just after some of its competitors reported mixed results\u2014with Dior-parent LVMH growing in the fourth quarter of 2023, while Burberry lowered its profit forecast for the last year because of \u201cfurther deceleration<\/a>\u201d in December sales. <\/p>\n Herm\u00e8s shares were up nearly 5% at 11 a.m. GMT. Its shares have surged about 28% in the last year.\u00a0<\/p>\n Herm\u00e8s has performed consistently\u2014and sometimes, even outperformed its peers\u2014in an industry that saw a pandemic-era spending boom followed by a lackluster demand from the key Chinese market and later, a slowdown in other parts of the world due to economic volatility. That\u2019s been a source of optimism for market watchers\u2014it also got Morgan Stanley to upgrade its rating of Herm\u00e8s\u2019s stock, Bloomberg reported<\/a>.<\/p>\n Morgan Stanley analyst Edouard Aubin wrote in a note this week: \u201cWhile we expect most personal luxury-goods brands to face subdued demand and have limited pricing power over the next 18 months at least, Herm\u00e8s stands out.\u201d<\/p>\n A number of things are working in favor of Herm\u00e8s, Aubin said in the note. First, Chinese consumers, who are part of the luxury brand\u2019s biggest revenue-driving geography<\/a>, are cutting purchases from more affordable brands in favor of Herm\u00e8s\u2019s high-end products. Second, since Herm\u00e8s caters to affluent shoppers, their consumers are hurt to a lesser extent by economic turbulence.<\/p>\n Herm\u00e8s has also stuck to its classic designs<\/a> and exclusive brand status within the luxury market, which has helped it create a niche of its own. The French company has also fared better than some of its peers who rely heavily on travel to boost spending, whereas Herm\u00e8s\u2019s clientele is largely local to each country.\u00a0<\/p>\n \u201cHerm\u00e8s is playing in a different league,\u201d JPMorgan analysts<\/a> said in a note.<\/p>\n<\/div>\n\nThe Herm\u00e8s factor<\/strong><\/h2>\n
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