April 23, 2020 / 6:53 AM / a month ago

Hermes weathers coronavirus storm better than luxury rivals

MILAN (Reuters) - Hermes has weathered the global coronavirus crisis better than rivals, with a 7.7% decline in first-quarter comparable sales, and the Birkin handbag maker said business was picking up strongly in China after shops reopened last month.

FILE PHOTO: A closed shop of French luxury group Hermes is seen amid the coronavirus disease (COVID-19) outbreak, on the Bahnhofstrasse shopping street in Zurich, Switzerland April 14, 2020. REUTERS/Arnd Wiegmann/File Photo

The fall in sales compares with declines of 15% or more reported by other luxury goods groups including LVMH, Kering and Moncler.

The coronavirus crisis first hit China - a major market for luxury goods - late last year before spreading around the world, leading to lockdowns across Europe, including Italy and France, as well as the United States.

Hermes Chief Executive Axel Dumas told reporters the second quarter would be hit hard by the health emergency given that 75% of the group’s stores are still shut.

However, he said that since shops in China had gradually reopened in March, sales there had grown by double-digits from a year earlier.

“The trend is very high since we reopened, probably higher given that no travel is allowed,” he said.

Shares in the group rose 2.6% to 689.8 euros by 0736 GMT, outperforming a 0.16% increase in the CAC 40 French blue chip index.

Dumas said the relatively resilient performance in the first quarter was partly due to an “incredible January” thanks to the Chinese New Year.

“The Chinese New Year counts almost as a double month,” he said.

He added that until the group was forced to shut its production sites — almost all of them in France — in mid-March, it did not have any supply chain issues, unlike some rivals.

Hermes closed all but one of its 42 sites in France, with a perfume factory converted to make hand sanitising gel instead. The group has been partially resuming operations in production and logistics sites since April 14.

Hermes, traditionally regarded as particularly resistant to downturns, has long been one of the steadiest performers in the luxury goods industry, in part due to its careful management of production and stocks, which have helped to promote its aura of exclusivity.

Its coveted $10,000 plus Birkin handbags tend to generate waiting lists, and can sometimes increase in resale value, adding to their attraction as a luxury purchase that is more immune to fashion trends and economic crises than other products.

Hermes said consolidated revenues for the quarter came in at 1.51 billion euros. As a result of the crisis, the group had already said it would trim its dividend for 2020 to 4.55 euros per share from 5.00 euros, keeping the payout at the same level as in 2019.

The group is maintaining strategic investments, both in production capacities and the distribution network, to prepare to resume business in the best possible conditions, it said.

Reporting by Silvia Aloisi. Editing by Jane Merriman

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