Hermès fourth-quarter sales top estimates amid resilient Chinese demand

By Scott Kanowsky

Investing.com -- Hermès International SCA (EPA:HRMS) posted better-than-anticipated sales in the fourth quarter as demand in China remained resilient despite the impact of COVID-19 cases that hit many of the fashion group's luxury peers.

Revenue in the three months until the end of December climbed by 22.9% at constant exchange rates to €2.99 billion, beating Bloomberg consensus estimates of an increase of 16.7% and a top-line total of €2.84B.

The company behind high-end brands like bagmaker Birkin called its performance in Asia excluding Japan "very dynamic," highlighted by "sustained" sales in its key Chinese market despite an uptick in COVID infections following the sudden lifting of pandemic restrictions late last year.

The development stood in contrast to Hermès' rivals LVMH Moët Hennessy Louis Vuitton SE (EPA:LVMH) and Kering (EPA:PRTP), which both reported a quarterly slowdown in China, the world's second-largest luxury market behind the United States.

Paris-based Hermès added that sales in group stores and its wholesale activities were boosted by a recovery in travel retail as international tourism rebounds from a COVID-era slump.

The fourth-quarter result pushed recurring operating income for 2022 up by a third to €4.70B, topping projections of €4.54B, in a sign that shopper demand for luxury goods stayed robust throughout the year even in the face of elevated living costs.

“In 2022, Hermès had an exceptional year thanks notably to the good performance of its international markets," said executive chairman Axel Dumas in a statement, adding that it has started the current year with "confidence" despite lingering "economic, geopolitical and monetary uncertainties around the world."

Hermès subsequently proposed a higher-than-expected dividend per share of €13. However, analysts at Citi flagged that the company did not unveil a special dividend despite a record cash position of €9.7B. Citi also noted that Hermès shares trade at 47 times forward earnings - twice the sector average.

The stock was slightly lower in mid-morning European dealmaking on Friday.