According to the recent third-quarter 2024 earnings report from the French luxury company Hermes, the brand achieved a consolidated sales revenue increase of 11% year-on-year for the first nine months of 2024, reaching €11.2 billion (approximately 86.336 billion RMB) at current exchange rates. This growth stands at 14% when calculated at constant exchange rates.
In the third quarter of 2024, Hermes reported a 10% year-on-year increase in sales, reaching €3.7 billion (around 7.709 billion RMB) at current exchange rates. During this quarter, the company saw revenue growth across all regions worldwide, including the Asia-Pacific market, which includes Greater China, recording a 7% year-on-year increase in sales.
However, even Brand Hermes has not been immune to the subdued luxury market in China.
According to a Reuters report, Hermes’ Executive Vice President of Finance, Eric du Halgouet, mentioned during the earnings call, “In the Chinese market, the downward trend has not stopped. We are still facing a decline in foot traffic since the Chinese New Year in 2024, although the decrease has not worsened further.”
This situation is similar to what other luxury companies, which also recently released their third-quarter earnings, are experiencing. LVMH, the parent company of Louis Vuitton, Dior, and Fendi, reported that sales generated by mainland Chinese consumers declined by single digits year-on-year globally in the third quarter. Meanwhile, Kering, the parent company of Gucci, said that its Chinese customers spent 35% less in the third quarter compared to the same period last year, leading to a 30% drop in its Asia-Pacific revenue.
By comparison, Hermes’ performance in the Chinese market is not considered as severe. Eric du Halgouet attributed this resilience to Hermes’ strategy of “increasing the average transaction value,” which compensated for the decline in foot traffic by selling more jewelry, leather goods, and ready-to-wear items for both men and women.
During the reporting period, Hermes saw double-digit year-on-year growth in its leather goods, ready-to-wear, accessories, and jewelry segments worldwide, with 17%, 15%, and 17% year-on-year increases, respectively.
This reflects the strength of the Hermes brand’s value and the effectiveness of its sales strategies, even as consumers remain cautious about high-end spending. In fact, Hermes has maintained a price increase strategy throughout 2024, implementing a global price adjustment across all product lines in January 2024, with an average increase of 8% to 9%.
However, Hermes’ watch business saw a 6% year-on-year decline in sales during the reporting period, making it the only category with a drop in performance. This decline is largely attributed to the sluggish performance of the Chinese high-end watch market throughout the year.
Earlier reports by Jiemian News indicated that, as of September 2024, mainland China and Hong Kong accounted for a two-thirds drop in global exports of Swiss watches. The overall weak environment in the watch market has negatively impacted high-end watch sellers to varying degrees. For Hermes’ watch division specifically, the Chinese market is one of its largest, making it vulnerable to the sharp decline in Chinese consumers’ demand for watches.
However, according to sales data from Taobao Online, the impact of weak luxury consumption in the Greater China region, and even globally, on Hermes has been relatively limited. The brand continues to show strong appeal to high-end consumers worldwide, reflecting the enduring value of the Hermes brand and the effectiveness of its iconic sales strategies.
Hermes is still seen as the luxury brand with the highest investment value in the current market. Investment bank analyst Luca Solca told Reuters, “We see Hermes as the best opportunity in our investment portfolio, immune to the challenging economic cycle of the second half of 2024.”
