PARIS, Feb 14 (Reuters) - French luxury group Hermes significantly exceeded analyst expectations in its fourth-quarter results, indicating a strong demand from affluent consumers for its most exclusive items, such as the Birkin bags priced above $10,000.
With a remarkable 18% increase in quarterly sales, Hermes continues to outperform competitors like LVMH and Gucci under Kering, at a time when the industry faces sluggish sales. Global luxury sales decreased by about 2% last year, impacted by a real estate crisis affecting spending in China and cautious consumers elsewhere.
Axel Dumas, the executive chairman, expressed satisfaction with the performance, stating, "We are celebrating an excellent year in a tougher environment."
Following the positive report, Hermes' shares surged by 4.5% in early Paris trading, driving up other European luxury stocks. By 0952 GMT, the shares were up by 2%.
Over the past 12 months, Hermes' shares have increased by 25%, pushing its market capitalization to just below 297 billion euros ($311.11 billion), nearing that of luxury giant LVMH, Europe's most valuable listed company with 75 brands and a workforce almost ten times larger.
Hermes' strategy of offering timeless, high-end products that maintain scarcity has continued to resonate with consumers.
JP Morgan analysts commented: "Hermes further confirms that during Q4, the luxury consumer was there, including in China, for the brands with solid momentum and execution."
Hermes reported fourth-quarter sales of 3.96 billion euros, an impressive 18% rise at constant exchange rates, with the Americas and Japan showing the highest growth rates.
The leather goods and saddlery segment, contributing almost half of the total revenue, surged by 21.5%, surpassing analyst expectations of a 13% increase.
While Hermes enjoyed double-digit growth, the wider industry faced challenges, particularly in the Asia region excluding Japan—Hermes' largest market, which still managed to achieve a 9% growth in the fourth quarter.
Despite positive signals, Executive Chairman Dumas noted that it is premature to predict a significant industry turnaround.
Hermes remains committed to its production consistency, with planned price adjustments of 6-7% to offset rising production costs and currency fluctuations, following a slightly lower price increase compared to the previous year.
($1 = 0.9563 euros)