Analysts explain why Hermès plays in a league of its own

Analysts explain why Hermès plays in a league of its own

Hermès plays in a league of its own. The French luxury brand is the most resilient of all, at least among other top ones of the same industry. It closed 2020 with revenue down 6% and the 4th quarter up 16% thanks to the booming performance of the Asian region (+39%). The outperformance is continuing in the early months of 2021, as pointed out by the president Axel Dumas to journalists. Why did Hermès win? Analysts focused on the luxury segment answer the question.

Hermès plays in a league of its own

“With over 20 per cent retail revenue growth in the fourth quarter, Hermès appears to be in a different league,” claimed Citi analyst Thomas Chauvet -. “On a full-year 2020 basis, it has been by far the most resilient brand in the luxury sector. It further supports the validity of a unique family-oriented business model built around timeless style, product quality and durability and deep relationships with the local clientele”. Luca Solca, of Bernstein, says that Hermès “benefits from top desirability across borders, and long waiting lists on its iconic products”. “Hermès was able – adds Mario Ortelli (Ortelli & Co.) – to tap into the desire of consumers to buy investment pieces, to buy less but better”. Finally, Deborah Aitken, analyst at Bloomberg Intelligence, believes that Hermès “confirmed its superiority in 2020, compared to its competitors”, when it “compensated the lack of tourism fluxes” with “a solid and loyal client base”.

Dumas’ comments

“This global crisis reveals the relevance of our model claims Mr. Dumas -, where humans and creation take center stage”. The president of Hermès also pointed out the behavior of Chinese clients from the start of 2021, which is coherent with that of the last 3 months of 2020. He also added the brand isn’t planning on raising prices this year, beside from a 1% increase, like the year before. “The company usually only raises its prices to reflect the cost increases”, he concluded.

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