Hermès’ demand for luxury watches and apparel skyrockets, boosting profits

(Bloomberg) — Hermes International’s sales jumped in the second quarter as consumers spent more on the luxury brand’s watches and apparel.

Revenue rose 20% at constant exchange rates to 2.71 billion euros ($2.77 billion), bag maker Birkin said in a statement on Friday. Analysts had expected a gain of 13%.

The watch division was the best performer with a growth rate of 49%, helped by the popularity of its Heure H model. The company’s largest unit, leather goods and saddlery, was the only one to experience a single-digit growth.

Investors and analysts will likely pay close attention to comments on the evolution of virus restrictions in China and consumer appetite there when management speaks on a call Friday. This week, authorities locked down a million residents in Wuhan, a sign that the country’s zero Covid policy remains.

Sales in China rebounded in June after being hit by virus restrictions and store closures in April and May, Hermès said. This region experienced the lowest growth rate over the period, unlike Europe, where France in particular benefited from a strong tourism boost.

Hermes follows LVMH and Kering SA in posting strong results, showing that the luxury consumer is resisting high inflation and worries about a potential economic slowdown so far.

The luxury brand known for its silk scarves and Kelly bags regularly opens new production capacities in France to meet the growing demand for its products. In March, Hermès announced that it would open two new leather goods workshops by 2026, which would create 500 jobs.

Current operating income for the first half amounted to 2.3 billion euros. Analysts had expected 1.97 billion euros.

The brand raised prices for its watches and jewelry unit by a range of 3% to 5% earlier this month, executive chairman Axel Dumas told reporters on a call.

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