French company surprises as global economic uncertainty drags down luxury fashion segment.
Hermès has reported third-quarter sales of €3.37 billion, up by 15.6%, surpassing analysts’ expectations.
The announcement comes as experts provide a damp outlook on the luxury sector, as people curb spending on high-end goods due to the current global economic uncertainty.
Yet the French design house “is managing to defy the economic headwinds thanks to price hikes which don’t appear to be weighing on customer demand,” Victoria Scholar, head of investment at online platform Interactive Investor, told Euronews.
In fact, the luxury market doesn’t necessarily follow the general demand rule that binds other goods, which dictates that total sales decrease as prices rise. “The luxurious allure of a Hermès bag, with some costing over $10,000 (€9,450), only seems to improve as prices increase,” Scholar said.
However, not all companies in the luxury segment have been immune to the weaker macroeconomic conditions.
The Kering group – which owns brands such as Gucci, Yves Saint Laurent (YSL) and Balenciaga – has reported a 9% drop in sales to €4.46 billion, below expectations of a 6% decline.
Gucci, which accounts for over half of Kering’s annual sales, saw a 7% fall in sales. Under a new creative direction, the group’s star label is in the middle of a revamp following a disappointing performance over the past two years.
Even revenues at Kering’s smaller brands, which have enjoyed solid growth in recent quarters, also shrank between July and August. YSL and Bottega Veneta’s sales were down by 12% and 7%, respectively.
Over recent years, the French corporation has lost ground to rivals like LVMH’s Dior and Louis Vuitton, which rebounded strongly after the pandemic.
LVMH, the world’s largest luxury group and one of Europe’s most valuable companies, reported a 9% rise in its fashion and leather goods third-quarter sales, lower than the 10% forecast.
Shoppers in Europe and the US are cutting down on high-end purchases, while the sector’s performance in China – a key growth engine – is complicated by record-high youth unemployment and the property crisis.
This has had an adverse effect on the French stock market in general, due to its reliance on the luxury industry. The sector’s slump, coupled with rising oil prices, saw London retake the top spot from Paris as Europe’s most valuable stock market last week.