Hermès, the French luxury group, had a phenomenal year in 2021, but its success came with its own set of challenges. While the company struggled to meet the soaring demand in the fourth quarter, its overall sales showcased the resilience of the global luxury market during and after the pandemic. In the final three months of the year, sales increased by 11%, slightly below analysts’ expectations. However, this decline was not due to a lack of demand. Production limitations imposed by the company resulted in a situation where more people wanted to buy Hermès bags and other products than the company could supply.
Driven primarily by US consumers, total sales for the fourth quarter reached €2.38 billion. This trend of increased luxury spending among American shoppers has been noticed by other prominent luxury brands as well. Despite this, capacity constraints faced by Hermès led to a 5.4% decrease in sales in the leather goods and Saddlery division.
For the entire year, Hermès achieved “outstanding” results, with revenue rising by 42% at constant exchange rates to €8.98 billion. Compared to the pre-pandemic period, sales increased by 33% over a two-year period. Recurring operating income recorded an impressive 78% rise to €3.5 billion, while net income grew by 77% to €2.445 billion.
In terms of sales channels, Hermès experienced a 44% increase in sales at its own stores compared to 2020 and a 41% increase over a two-year period. Despite the challenges faced by the travel retail sector, wholesale sales also rose by 24%.
Regionally, Asia and America witnessed the highest growth rates compared to both 2020 and 2019. Europe, which faced challenges due to lower tourist arrivals during the pandemic, returned to growth when compared to the pre-Covid period. This indicates that both domestic shoppers and tourists are contributing to the recovery. Despite restrictions in some US cities during the fourth quarter, the American market showed remarkable performance with a 57% year-on-year increase and a 24% increase over two years. Asia excluding Japan experienced a 45% increase over one year and a 65% increase over two years, driven by sustained performance in Greater China, Australia, and Singapore. Japan saw a 25% increase over one year and a 20% increase over two years, benefiting from loyal local customers and the lifting of the state of emergency. Europe excluding France recorded a 37% increase in one year and a 10% increase over two years, thanks to a strong second half and the development of a loyal customer base.
All business lines for Hermès saw growth in terms of product categories. Ready-to-wear and Accessories, Watches, and Other Hermès Business Lines (Jewellery and Homeware) witnessed notable increases. Despite the temporary decline in the fourth quarter, the Leather Goods and Saddlery division experienced exceptional sales throughout the year. Demand for both new bags and classic Hermès products remained high. The Ready-to-wear and Accessories business line saw dynamic growth due to the success of its collections and strong demand for the SS22 collections. The Silk and Textiles business line performed well, while Perfumes and Beauty benefited from successful launches. The Watches business line experienced growth from both new products and classics, and the Other Hermès business lines showed momentum in both Jewellery and Homeware.
Looking ahead to 2022, the impact of the ongoing pandemic remains uncertain. However, Hermès has set ambitious goals for revenue growth at constant exchange rates in the medium term. Despite the challenges faced, Hermès has proven its resilience and adaptability to changing market conditions, solidifying its position as one of the leading luxury brands worldwide.
Helpful links:
– Reuters: Hermes promotes Yves Bomen’s to lead America’s unit
– Business of Fashion: Hermès Q4 Growth Slows on Production Capacity Woes
