Amid the economic downturn, the luxury sector remains resilient and demand for high-end designer goods is still looking great. For luxury house Hermès, the post-Covid era sees the brand surpassing €200 billion in market value and edging over Swiss drugmaker Novartis, where it is now the second-most valuable luxury brand after industry leader LVMH.
For the last three months, Hermès has rallied about 30 per cent since the start of 2023. Its whole-year financial results for 2022 saw the firm’s consolidated revenue amount to €11.6 billion, which was a 29 per cent increase compared to 2021. Looking at the figures on a broader scale, the brand is now worth more than the combined value of French companies like Carrefour, Societe General, Orange, Renault and Airbus, as pointed out by Bloomberg.
This is bolstered by the reopening of the China market and the resumption of international travel. As Covid-19 restrictions eased in certain Chinese cities last summer, there was a resurgence in demand within the country. Additionally, the return of affluent American tourists to Europe, supported by the favourable exchange rate of the dollar, has contributed to increased sales in prominent luxury markets such as France, Italy, and the UK.
Hermès handbags are constantly in high demand despite its high starting price and some rarer models can even hit hundreds of thousands. Even then, the demand for its Birkins and Kellys have far outpaced supply. Additionally, because of the exclusivity, many Hermès bags retain their value well in the resale market where it is possible to find bags in the millions.
The brand has forged a reputation as being one of the most exclusive brands in the world of luxury, and its waitlist for Birkins could go up to years. Globally, there are around 300 stores worldwide, which is about the same number a decade ago, but sales have more than doubled in the same period. With increasing sales, one would expect the company to improve its supplies, but under the Dumas family, the controlling stakeholder of Hermès, it has adopted “a conservative approach to managing growth”, as mentioned in an article by Forbes. The family kept a firm grip on the brand’s handbag supplies and tightly controlled its product distribution. In contrast, as part of the brand’s plans to scale up its production, Hermès is inaugurating a new leather manufacturing plant in Louviers, Normandy.
Investors had anticipated a challenging period for the luxury sector, as it has historically contracted during economic downturns. However, the recent recession caused by the pandemic was unexpectedly brief. To maintain the exclusivity of their products, luxury brands have also increased their prices this year, citing both inflation and exclusivity preservation as reasons. In fact, Hermès is just one example of several European companies that are benefiting from the surge in luxury stock prices. This rally has propelled Paris to become Europe’s top stock market, surpassing London, with the gap between the two cities widening this year.
Elsewhere, LVMH, the world’s largest luxury conglomerate, is valued at US$459 billion, making Bernard Arnault the wealthiest person in the world with a net worth surpassing US$200 billion. Tesla owner Elon Musk is now the second richest person in the world with a net worth of US$180 billion.
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