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The backstory: Luxury goods brand Hermès has been making waves with its highly sought-after Birkin and Kelly handbags, which can fetch tens of thousands of dollars. The demand for these exclusive bags has been so overwhelming that the company said it would expand its production in France through 2024. But buyers still face long waitlists, driving many to the resale market, where they sometimes pay even more to add these coveted pieces to their collections.
More recently: Despite the challenges posed by the pandemic, Hermès has continued to perform well. The company saw sales boost by around 25% in the Asia-Pacific region (excluding Japan), and it opened a new store on Madison Avenue in New York City last October. It's doing well enough to announce it would raise its prices by 7-10% over the coming year.
More development: Hermès recently announced some outstanding sales and profit forecasts. Sales in the last quarter of 2022 rose by 23% from the previous year, fueled by wealthy Chinese customers snapping up Hermès bags. In the fourth quarter, Hermès brought in €2.99 billion (US$3.2 billion), and its yearly recurring operating profitability hit an all-time high of 40.5%. Meanwhile, other luxury brands are struggling to keep up due to upheavals caused by COVID.
Hermès' US sales also saw remarkable growth, climbing by 40.8%, and it experienced solid growth in China even with COVID still lingering.
"Hermes has ploughed through the COVID-19 related issues in 4Q22, and produced a very solid beat to consensus," said Bernstein analyst Luca Solca in a note. "With recent very strong share price performance, much of the good news seems to be reflected in the Hermes share price."
"The stock has been very strong YTD (year to date), and expectations were high into today, but still the operational outperformance should warrant further gains this morning," said J.P. Morgan analysts, referring to the Hermès' stock.
"Luxury stocks have been an investor favorite for a while now but the fact that the big tech stocks don't have much wind in their sails at the moment is putting the spotlight on them, especially with the Chinese economy reopening," said Roland Kaloyan, head of the European equity strategy at Societe Generale SA.