July 19, 2013
French leather goods and scarves maker Hermès reported a 16 percent increase in revenue to $1.19 billion for the second quarter of 2013 due to sales of home furnishings and a strong spring/summer marketing campaign.
The brand saw growth in several regions around the world, but saw the most in Asia and North America, both of which increased 17 percent during the second quarter. Hermès seems to see an increase in revenue quarter after quarter because of strong ties to its heritage with its ability to innovate and capture new customers, experts say.
“Brands that create value across generations become a vital and valuable part of our culture and Hermès is one such exemplar,” said Rebecca Robins, London-based director for Europe, the Middle East, Africa and Latin America at Interbrand and co-author of “Meta-luxury: Brands and the Culture of Excellence.”
“As ever more discerning connoisseurs of true luxury are reassessing what they value and why, the brands that will continue to assert their leadership are those that have stayed true to their core heritage, while investing in innovation and excellence, and whose entire premise centers on the imperative of the long-term health of the brand,” she said.
“The recent results would seem to uphold this.”
Ms. Robins is not affiliated with Hermès, but agreed to comment as an industry expert.
Hermès did not respond by press deadline.
Around the world
This increase in revenue follows the brand’s high-profit margins from 2012.
Hermès set record profits for 2012 with a 22.6 percent increase in revenue from the previous year and maintained its über luxury brand status with help from its coveted bags.
The most growth was seen in the Asian market where two new stores were added and six were renovated, and the brand’s accessories seem to be a big driver of revenue worldwide (see story).
Hermès is optimistic, saying in a company statement that it expects to exceed its mid-term growth target of a 10 percent increase compared to the year-ago period.
Overall, non-Japan Asia and North America had the greatest increase in sales for Hermès. Both areas were up 17 percent during the first half of this year.
Sales in Europe increased 14 percent, specifically with sales in France seeing a boost of 13 percent. Also, sales in Japan rose 8 percent.
Even with the current financial issues in China, Hermès is continuing to have a strong pull in that market.
“Things are looking up for the luxury sector,” said Jordan Phillips, New York-based author of “The Lure of Luxe.”
“Chinese and American consumers are becoming more sophisticated about luxury brands, so Hermès is in a good position because of its relatively understated style,” she said.
“The recent Hermès results show that the company's growth is well balanced in all geographic areas, which is a very positive sign for its long-term growth potential.”
Since Hermès is seeing the most growth from the North America and Asia, the brand should focus more of its marketing efforts and resources to serving consumers in this area.
“China and U.S. will continue to be the major purchasers of luxury goods and I expect to see Hermès and other luxury goods providers continue to allocate resources to these markets to ensure they satisfy the appetites of the luxury consumer in each market,” said James Dean, vice president and head of the luxury practice at WealthEngine, Bethesda, MD.
In addition to the brand upholding its standard of luxury, Hermès has also shown off its playful side this year with its “A Sporting Life” campaign, which could be a reason for the spike in sales.
“We've also seen a playfulness this year at Hermès, consonant with this year's theme of A Sporting Life, which has informed greater engagement with digital platforms,” Interbrand’s Ms. Robins said.
A Sporting Life campaign
Furthermore, the brand’s jewelry and Art of Living sectors had a 40 percent increase in sales.
Ready-to-wear and fashion accessories increased 21 percent, silk and textiles increased 13 percent and perfumes saw a 20 percent boost due to the new Jour d’Hermès fragrance.
Overall, Hermès growth signifies that the luxury industry as a whole remains strong.
“Hermes' financial results are a useful proxy for the luxury market,” WealthEngine’s Mr. Dean said.
“I expect the luxury market to continue to grow steadily over the next two to three years,” he said.
“Hermès' continued growth should continue at this pace, assuming the brand continues to emphasize and exploit the success it is having in ready-to-wear and fashion accessories and perfumes as these product segments can continue to grow at a rapid rate given Hermès' demonstrated success.”
Erin Shea, editorial assistant on Luxury Daily, New York