(Bloomberg) -- Hermes sales rose as the Birkin bag maker met resilient demand for its pricey handbags, bucking the broader luxury market slump that’s dragged down peers like Gucci-owner Kering SA.
Sales increased 11.3% at constant exchange rates in the third quarter, Hermes International SCA said in a statement Thursday, just ahead of analysts’ estimates. Kering, meantime, warned that annual profit is likely to fall to the lowest level since 2016 as flagging Chinese demand hampers a Gucci turnaround.
Hermes has held up better than rivals amid the luxury slowdown because it caters to the wealthiest clients, whose spending tends to be more reliable than less well-heeled customers. The French company enjoys strong pricing power and waiting lists for its most coveted handbags. Even LVMH, the world’s largest luxury group, saw sales decline in the quarter.
Hermes’ sales growth “confirms an industry-beating resilience, supported by the more premium parts of the group’s offering,” such as leather goods and ready-to-wear, Jefferies analyst James Grzinic said in a note.
Speaking to reporters, Hermes Chief Financial Officer Eric du Halgouet said Hermes isn’t seeing any change in global trends early this quarter.
Shares of Hermes rose as much as 3.4% in Paris, bringing the gain this year to about 10%. Kering gained about 2% after falling earlier. It’s down 41% this year.
Hermes’ sales in Europe, Japan and the Americas all exceeded estimates in the quarter, while the region that includes China increased 1%, below expectations for 2.3% growth. All divisions grew except for the watches unit, which tumbled 18%, double the estimates.
Although traffic in stores in China has slowed since the start of the year, Hermes’ performance has managed to hold up as its most loyal customers still splurge on the priciest products, such as jewelry, handbags and ready-to-wear fashions, du Halgouet said.
Sales in France rose 13.1% in the period, weathering the disruption in Paris related to the Olympic Games, which was offset by strong demand at its stores in coastal towns, he added.
At Kering, recurring operating income this year could be around €2.5 billion ($2.7 billion), the company said Wednesday. That would be the lowest level in eight years and less than analysts were expecting.
At Gucci, which makes up the bulk of Kering’s profit, sales slumped 25% in the third quarter from a year earlier. The results show how tricky it has become for Kering to reset its flagship brand as demand for high-end goods cools, particularly in China.
The Pinault family holds a 42% stake and 59% of the voting rights in Kering, which makes up the bulk of founder Francois Pinault’s wealth. His fortune declined to $21.7 billion through Wednesday, erasing $13.8 billion so far this year, according to the Bloomberg Billionaires Index.
(Updates with analyst comment in fourth paragraph, Pinault’s wealth in last)
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