French luxury company Hermès has spent nearly 200 years emphasizing quality, scarcity and desirability — a strategy that's helped it dominate the luxury sector, even over its much larger rivals.
Coveted products such as its Birkin and Kelly handbags — named after icons Jane Birkin and Princess Grace Kelly of Monaco — consistently drive demand, even when most consumers pull back their spending.
Analysts say the Birkin and the Kelly account for between 25% and 28% of Hermès' total revenue. The bags often double or triple in value on the resale market.
"I think they're also difficult to get, and that adds to the cachet and the desirability of the brand," said Luca Solca, senior analyst of global luxury goods at Bernstein. "It's a sign of distinction, then desirability is also going to be increased as a consequence."
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For fiscal year 2023 Hermès reported the fourth-highest revenue total of the major luxury fashion brands, behind LVMH, Richemont and Kering.
Hermès has fewer than 300 storefronts, but it keeps up with its larger competitors. In its most recent quarter, Hermès posted double-digit revenue growth while competitors LVMH and Kering reported sharper-than-expected declines in sales. Plus, the company's shares have risen more than 10% since the start of 2024, while LVMH and Kering have fallen about 15% and about 40%, respectively.
Globally, many luxury consumers have pulled back on spending, particularly aspirational buyers in 2023 and 2024. Experts say this trend is set to continue.
Money Report
Though Hermès performed well in Q3, it wasn't completely immune, reporting slower sales growth in all regions compared with the year prior. The company noted in its earnings call that despite lower traffic, its customers were spending more money per transaction.
"I think that high-end consumers have become an even greater focus for the industry as they have demonstrated a very high propensity to spend, provided you bring them something that they consider valuable and distinct," said Solca. "And I think that as far as distinction is concerned, Hermès has quite a lot of it."
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