Hermes (HRMS.PA) surpassed expectations in the first quarter, boosted by robust demand for its luxury accessories, particularly in the United States and Europe, as the sector struggles to recover from the Ukraine conflict and China’s COVID restrictions.
Revenues for the three months ended March were 2.8 billion euros ($3.06 billion), up 27 percent at constant currency rates, exceeding average projections of 15 percent organic growth.
The results suggest that “the year is off to a great start,” according to Luca Solca, a Bernstein analyst who noted “another excellent consensus beat.”
All divisions saw a double-digit increase, including Hermes’ leather goods and saddlery business, which includes the famous Birkin and Kelly handbags and accounts for roughly half of the company’s yearly revenues, up 15.8%.
Other segments increased even faster, with ready-to-wear and accessories up 44 percent and watch sales up 62 percent, respectively.
Executive Vice President for Finance Eric du Halgouet told the media in a call that Hermes had a solid start to the year in China until the beginning of March when several outlets were closed owing to regulations aimed at preventing the spread of the coronavirus.
According to the executive, Hermes is in close communication with its 60 employees in Russia, continuing to pay their salaries while also offering training and psychological assistance. Some have relocated to neighboring nations, bolstering the organization’s efforts.
Last month, the company announced that it was suspending commercial operations in Russia, closing three locations in Moscow, and deferring plans to launch a fourth in St. Petersburg. All shipments to the country, including fragrances and beauty items, have been banned, and Hermes is abiding by guidelines prohibiting the sale of products to oligarchs on sanctions lists, according to the CEO.