In The Lap Of Luxury

In The Lap Of Luxury
Daniel Johnston

10 months ago2 mins

Mentioned in story

What’s Going On Here?

Hermès’s quarterly results showed it’s outshining luxury rivals.

What Does This Mean?

Hermès is in a league of its own at the moment. While China’s lockdowns dented competitors’ sales toward the end of last year, Hermès seemed completely unruffled – and this past quarter’s hefty Chinese New Year sales suggest the firm’s only going from strength to strength. And it’s not just thriving in China. While rival LVMH stagnated in the Americas, Hermès saw some luxe stateside growth, with a winning combination of brand desirability and waiting lists keeping demand hot. That helped Hermès's watches division forge right ahead too, even as top Swiss watchmakers warned of a potential slowdown – and the firm’s ready-to-wear offerings and handbags didn't leave any money on the table either. All in all, sales rose 23% yearly (excluding currency fluctuations), easily outstripping the anticipated 16%.

Why Should I Care?

For markets: Classy cash.

Hermès’s stock is up over a third this year, outperforming market leader LVMH – and just last week, its valuation crossed the €200 billion ($220 billion) threshold for the first time. That might be down to the ace Hermès has up its (silk) sleeve. See, the firm’s classic styles are a hit with older (and even wealthier) luxury shoppers, who are less vulnerable to economic slowdowns. So keep an eye on the valuation gap between Hermès and market leader LVMH – if the former can stay on track, there’s a good chance it’ll keep narrowing.

Zooming out: King of the castle.

This luxury boom will have shareholders popping open the Moët et Chandon – especially Bernard Arnault, whose family owns half of LVMH. Last week Arnault’s fortune surged to an eye-watering $210 billion, cementing his position as the world's richest person and outshining Elon Musk’s $180 billion. And that makes sense: Tesla’s having to slash prices to increase demand, but LVMH’s designer offerings are still sitting pretty – and pricey.

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