Against the background of general challenges faced by the global luxury goods market, Hermès has once again demonstrated its unique market resilience and growth potential. According to the latest financial report for the second quarter of 2024, Hermès not only exceeded market expectations, but also achieved strong growth in multiple key markets, demonstrating its leadership in the luxury goods industry.

Key financial data

●Operating income: Revenue in the first half of the year was 7.5 billion euros, a year-on-year increase of 15%. Analysts expected 7.45 billion euros, of which second-quarter revenue was 3.7 billion euros, a year-on-year increase of 13.3%. Analysts expected 3.65 billion euros, an expected increase of 11.5%.

●Operating profit: Recurring operating profit in the first half of the year was 3.15 billion euros, a year-on-year increase of 6.8%, and analysts expected 3.17 billion euros; the recurring operating profit margin in the first half was 42%, compared with 44% a year ago, and analysts expected 42.5%.

●Net profit: Net profit in the first half of the year was 2.37 billion euros, a year-on-year increase of 6.4%, and analysts expected 2.3 billion euros.

In contrast, on Tuesday, LVMH, the world's largest luxury goods group, announced that its organic sales growth slowed to 1% in the second quarter, which was lower than expected. In the quarter, LVMH's organic sales increased in Europe, the United States and Japan, but in Asia other than China and Japan, sales growth increased. The 14% decline partially offset the impact of strong overseas spending by Chinese tourists. On Wednesday, LVMH's old rival Kering announced that its revenue in the first half of the year fell by 11% year-on-year, and its revenue in the Asia-Pacific region outside Japan fell by 22%.

Segmented business revenue

●Leather goods and harnesses: Leather goods and harnesses business revenue in the first half of the year was 3.215 billion euros, a year-on-year increase of 19.1%, of which second quarter revenue was 2.785 billion euros, a year-on-year increase of 17.9%, and analysts expected an increase of 11.5%.

●Ready-to-wear and accessories: Revenue from ready-to-wear and accessories in the first half of the year was 2.162 billion euros, a year-on-year increase of 15.5%, of which revenue in the second quarter was 1.101 billion euros, a year-on-year increase of 15.1%, and analysts expected a 14.7% increase.

●Silk and textiles: Silk and textiles revenue in the first half of the year was 436 million euros, a year-on-year increase of 1.5%, of which revenue in the second quarter was 194 million euros, a year-on-year decrease of 5.6%, and analysts expected a 0.5% decrease.

●Watches: In the first half of the year, watch revenue was 308 million euros, a year-on-year decrease of 0.2%, of which second quarter revenue was 142 million euros, a year-on-year decrease of 4.9%, and analysts expected a 3.45% increase.

●Perfume and beauty: Perfume and beauty revenue in the first half of the year was 259 million euros, a year-on-year increase of 4.9%, of which second-quarter revenue was 129 million euros, a year-on-year increase of 5.6%. Analysts expected a decrease of 1.25%.

●Other businesses including jewelry and home furnishings: Other business revenue in the first half of the year was 967 million euros, a year-on-year increase of 18.7%, of which revenue in the second quarter was 462 million euros, a year-on-year increase of 13%.

Market segment revenue

● France: France’s revenue in the first half of the year was 680 million euros, a year-on-year increase of 14.7%, of which revenue in the second quarter was 368 million euros, a year-on-year increase of 15.1%, and analysts expected a 12.6% increase.

●European region including France: Revenue in Europe in the first half of the year was 1.651 billion euros, a year-on-year increase of 16.4%, of which revenue in the second quarter was 894 million euros, a year-on-year increase of 18.2%, and analysts expected an increase of 11.8%.

●Japan: Japan’s revenue in the first half of the year was 693 million euros, a year-on-year increase of 22.4%, of which revenue in the second quarter was 336 million euros, a year-on-year increase of 19.5%, and analysts expected a 19.6% increase.

●Asia-Pacific region outside Japan: Revenue in the Asia-Pacific region outside Japan in the first half of the year was 3.521 billion euros, a year-on-year increase of 9.9%, of which revenue in the second quarter was 1.601 billion euros, a year-on-year increase of 5.5%, and analysts expected an increase of 4.75%.

●Americas: Revenue in the Americas in the first half of the year was 1.329 billion euros, a year-on-year increase of 12.6%, of which revenue in the second quarter was 715 million euros, a year-on-year increase of 13.3%, and analysts expected an increase of 11.2%

Financial report highlights

The American market and other global markets performed well

Hermès performs particularly well in the American market. In the first half of the year, revenue in the Americas region reached 1.329 billion euros, a year-on-year increase of 12.6%. Among them, revenue in the second quarter was 715 million euros, a year-on-year increase of 13.3%, far exceeding analysts’ expectations of 11.2%. This growth is mainly due to the brand's strong market demand and brand loyalty in the region.In addition to the Asia-Pacific region, Hermès has achieved double-digit growth in the European, American and Japanese markets, especially the growth in the Japanese market of nearly 20%. This strong momentum reflects the widespread recognition and continued demand for the Hermès brand around the world.

Strong growth in segments and businesses

Hermès' leather goods and harness business continues to lead growth, with growth exceeding 19% each quarter. This performance not only consolidated the market position of its core products, but also led to a significant increase in overall revenue. Furthermore, despite the complex global economic and geopolitical environment, Hermès confirmed its ambitious targets for revenue growth at constant exchange rates.

Asia Pacific Challenges

Although Hermès has achieved significant growth in many markets around the world, Hermès' performance in the Asia-Pacific region, especially the Chinese market, has been slightly weak. In the second quarter, revenue growth in the Asia-Pacific region was less than 6%, which was significantly slower than the 14% in the first quarter. Hermès explained that this was mainly due to the decline in passenger traffic in Greater China and the impact of a high base in the same period last year. However, even in this environment, Hermès still performs better than most competitors in the Chinese market.

Regarding the slowdown in growth in the Asia-Pacific region in the second quarter, Hermès explained that after the first quarter of the Lunar New Year, passenger traffic in Greater China declined. Moreover, after the epidemic restrictions were lifted in the second quarter of last year, the performance of the Asia-Pacific region was outstanding. This year's growth was affected by the high base. 

Wall Street News once mentioned that due to the "defeat" in the Chinese market this year, European luxury brands that have released financial reports since last week have either slowed down or declined in sales growth.

Last week, Swiss fashion watch manufacturer Swatch announced a 70% drop in net profit in the first half of the year, blaming it on the decline in demand for luxury goods in the Chinese market; British Burberry expects to have an operating loss in the first half of this year and full-year operating profit will be lower than guidance, Germany Hugo Boss lowered its sales and profit guidance for this year due to weak consumer demand in China and other parts of the world; Swiss Richemont sales increased slightly by 1% in the first quarter, but sales in Greater China fell by 27%.

Compared with these brands, Hermès is already regarded as a "high-achieving student" among overseas high-end luxury brands in the Chinese market.

Market reaction and outlook

After the financial report was released, Hermès' stock price performance also reflected the market's positive reaction. Although it fell nearly 0.8% in early trading, it quickly recovered and rose 4.4% by midday. In the end, Hermès' stock price closed up nearly 1.1%, successfully breaking away from its two-day downward trend.

Looking ahead, Hermès remains confident in its growth prospects despite global economic uncertainty. Axel Dumas, executive chairman, said: "The solid performance in the first half of the year reflects the strength of the Hermès model amid a more complex economic and geopolitical backdrop."

At a time when the global luxury goods market is facing many challenges, Hermès continues to stand out from the competition with its excellent brand strength and market strategy. Whether in the American, European or Japanese markets, Hermès has shown strong growth momentum, demonstrating its status as a leader in the luxury goods industry. Although growth in the Asia-Pacific region has slowed, Hermès's strong performance in other markets around the world is enough to prove its unique advantages and continued potential in the luxury sector.