Hermès (RMS.PA) continues to defy the slowdown gripping the luxury industry, with indications suggesting it could surpass LVMH-owned (LVMUY) Louis Vuitton as the world’s premier luxury brand.
In an April 12 note, Thomas Chauvet, head of luxury goods equity research at Citi, projected that Hermès’ sales could reach the symbolic milestone of 20 billion euros within the next three years, a feat previously achieved by Louis Vuitton in 2022.
For the full year 2023, Hermès reported sales of 13.4 billion euros ($14.3 billion).
“We think Hermes could ultimately surpass Vuitton as the industry’s largest brand by turnover,” stated Chauvet.
On Thursday, the renowned Birkin bag maker disclosed that first-quarter revenue surged by 17% annually to 3.8 billion euros ($4.1 billion), propelled by robust leather goods sales.
Hermès also witnessed double-digit sales growth across all regions, including a remarkable 25% increase in Japan.
In the wake of these results, analysts at Stifel remarked, “All in all, a strong start to the year supported by above average +8-9% pricing, which confirms the resilience of its largest leather goods division, the high desirability for the Hermès brand and the stock’s defensive appeal in a more challenging demand backdrop for the sector this year.”
Conversely, LVMH’s first-quarter earnings painted a different picture, with a 2% decline in revenue year over year to 20.69 billion euros.
While specific revenue figures for Louis Vuitton were not divulged, the fashion and leather goods division posted revenue of 10.4 billion euros, also marking a 2% decline from Q1 2023.
Year to date, Hermès stock has surged by 22%, outpacing LVMH’s 4% gain.
“The party is coming to an end,” remarks former LVMH chairman Pauline Brown, reflecting on the broader industry trends. Brown underscores a normalization phase after an “unprecedented growth wave” spanning from 2008 through the pandemic, noting a market saturation effect.
While China has witnessed the most pronounced pullback, signs of softness are also apparent in the US, particularly as consumers start to push back against escalating prices.
