Hermes International is set to release its third quarter sales report on Tuesday. Here are the key details you should know:
Sales Forecast
According to a consensus forecast provided by FactSet, five analysts estimate that the French luxury house will post sales of €3.31 billion ($3.50 billion) for the three months ending in September. In the same period last year, Hermes reported sales of €3.14 billion.
What to Watch
Industry Headwinds
The luxury sector has been experiencing a slowdown in sales due to higher interest rates and inflation, which have affected consumer spending. However, Hermes is expected to be less impacted by these macro headwinds compared to its luxury counterparts. This is primarily because of its business model that regulates supply and its focus on the wealthiest consumers, as noted by Barclays analysts.
Exposure to China
Investors will be closely monitoring Hermes’ performance in China, a crucial market in the luxury sector that has been facing economic challenges. Hermes has a higher exposure to Asia than its peers, accounting for approximately 48% of sales (excluding Japan). Any significant changes in the external political or economic landscape could pose a risk to the company, as pointed out by Citi analyst Thomas Chauvet. However, unlike many other luxury brands, Hermes relies less on tourism spending, which has been weaker among Chinese consumers, according to Citi.
Growth Distribution
Barclays analysts anticipate that Hermes will demonstrate resilience across most regions compared to its competitors. They expect the French company to achieve sales growth of 12% in France, 15% in Europe and the Americas, 10% in Asia-Pacific, and 25% in Japan (all at constant exchange rates).