Strong Asia pushes Hermès sales up 16% in fourth quarter

Birkin bag maker Hermès weathered the coronavirus pandemic better than luxury goods rivals, with sales recovering sharply in the final part of 2020 thanks to a strong performance in Asia and soaring online revenues.

The French group said on Friday sales in the October to December period rose by 16% at constant exchange rates - way better than the 8% increase forecast in an analyst consensus cited by UBS.

Shares in the group, which have surged 41% in the past year despite the global health emergency, rose by more than 6% in early trade in Paris on Friday, the top gainer in the blue chip CAC 40 index.

Revenues in the last three months of 2020 rose by 47% in Asia, with China, South Korea and Australia driving the rebound.

Profitability was also better than expected, particularly given that Hermès, unlike most rivals, said it had not increased prices in 2020. The gross margin increased to a record 37% in the second half of the year.

"Hermès benefits from top desirability across borders, and long waiting lists on its iconic products," said Luca Solca, luxury goods analyst at Bernstein.

"The bigger difference with weaker peers is not only better performance in Europe, but also a significantly stronger rebound in Asia."

For the whole of 2020, revenues at constant exchange rates declined by just 6% to 6.39 billion euros ($7.7 billion), the best performance so far in the luxury goods sector, which has been hit hard by store closures and a lack of tourist flows due to the coronavirus pandemic.

"The absence of tourists was offset by the loyalty of our local customers and a strong increase in online sales," Hermes' Executive Chairman Axel Dumas told reporters.

He declined to elaborate on what proportion of overall sales had taken place online but said e-commerce had doubled or more in all regions and online sales had gone well even after stores reopened.

Sales in the Americas region were flat in the fourth quarter compared with a year ago. Europe was hampered by new store closures and lockdowns imposed from November to contain a resurgence of infections, with sales falling 10%.

Hermès - known for its $12,000-plus handbags like the Birkin, which often generates waiting lists - is traditionally regarded as particularly resistant to downturns and has long been one of the steadiest performers in the luxury industry, in part due to its careful management of production and stocks.

Dumas said the outlook for 2021 remained uncertain due to the pandemic. He said shopping behaviour was "normal" in China despite new travel curbs being imposed there in the run up to the mid-February Lunar New Year holiday.