- Hermès reported an 11.4% increase in revenues for the first nine months of 2024.
- The French fashion house is bucking the trend of the luxury industry as competitors like LVMH stutter.
- Hermès is succeeding while peers struggle because it follows the law of luxury to a tee, analysts say.
If the luxury slump is an epidemic, Hermès is managing to stay immune.
A week after LVMH announced dismal third-quarter earnings and a day after Kering reported a 15% year-on-year decline in revenue in its most recent quarter, the French luxury design house has presented its own results.
In stark contrast to its peers, Hermès's revenue jumped.
Revenues were 11.2 billion euros ($12.1 billion) for the first nine months of 2024, up 14% from the same period in 2023.
Third-quarter sales also displayed resilience, rising to 3.7 billion euros ($4 billion), up from 3.4 billion euros ($3.7 billion) in the third quarter of 2023.
The nearly 200-year-old family company even reported a 7% growth in Asia, excluding Japan, where sluggish demand for luxury in China has wreaked havoc for many other luxury brands.
The only sore spot for Hermès was the watch sector, where sales tumbled 6%. However, Carole Dupont-Pietri, Head of Investor Relations at Hermès, told analysts during an earnings conference that the company attributed the decline to a move of an annual watch event in China from September to November 2024 and a slowdown in exports from Switzerland.
Asked by analysts what has surprised her and Eric du Halgouët, Executive Vice-President of Finance, about the house's results over the past three quarters, Dupont-Pietri said: "It's this contrast, I believe, between the resilience of Hermès, especially in China and greater China, compared to other players in the industry."
But Hermès's success isn't entirely surprising. The fashion house is reaping the rewards of a long-term strategy and abiding by the fundamental laws of luxury.
Playing the long game
Martin Roll, global business strategist and senior advisor at consulting giant McKinsey, told Business Insider that demand for luxury fashion ebbs and flows in a cycle. Hermès manages to stay the course because, unlike its peers, it measures success through a long-term lens, he said.
Unlike other brands, Hermès's brand identity is "based on scarcity," he added. It also doesn't chase fashion trends or release products heavily based on seasons, Roll said.
"You do not buy a bag or a scarf for the season for Hermès," he said. "But you can justify it because it's almost like a long-term asset in your household."
Hermès's strategy "sacrifices short-term growth," Roll said. The fashion house does that intentionally because "they're not chasing growth."
"They know very well that, like all the luxury brands, Hermès could run the risk of being over-saturated," Roll said, adding that the brand being family-owned is also an advantage.
"You have that stability in the ownership," he said. "And you have leadership stability."
"When you are one of the houses in LVMH, you're still reporting to LVMH. You still have expectations of the family," Roll added.
The exclusivity allure
Milton Pedraza, CEO of the Luxury Institute, previously told BI he credits Hermès's success where others have struggled this year to its allure of exclusivity.
In China, competitors fell into the "greedflation" trap of taking advantage of disruptions to push price increases on consumers after the pandemic. This angered consumers, forcing some brands to discount products to try to appease them, Pedraza said.
However, the result was a mixed strategy that left consumers confused, Pedraza said. "It's a little bit of schizophrenia," he added.
Where many luxury brands have increasingly sought celebrity partnerships and collaborations with other growing industries like sports and entertainment, Hermés continued cruising in its own lane.
In the luxury fashion world, there's a growing belief that "getting attention is everything," Pedraza said.
"Hermés doesn't believe that," he added. "They get attention by not seeking attention."