Travel’s return buoyed Kering and Hermès International’s third quarter results.
Both French luxury firms easily beat revenue estimates for the period ended Sept. 30 Their results follow the positive revenue reports from LVMH and Neiman Marcus Group, showing that consumers haven’t lost their appetite for luxury, despite concerns of a global recession.
Third quarter group revenue for the period jumped 23 percent to 5.14 billion euros ($5.17 billion) from 4.19 billion euros ($4.22 billion). CFO Jean-Marc Duplaix told investors that Western Europe’s growth was fueled by a “sharp rebound” in tourism-driven sales from Americans flocking to popular regional destinations over the summer.
Despite Duplaix believing the U.S. will enter a recession within 12 months, the Kering executive isn’t planning to change course. And while Covid affected Mainland China revenue, Duplaix said the Gucci owner will “keep calm and carry on” because there’s still “a lot of appetite for luxury goods in China.” While Kering has continued to pay rent on the stores it closed after Russia invaded Ukraine and pay affected workers, Kering might exit Russia altogether, he said.
Gucci’s revenue rose 18 percent to 2.58 billion euros ($2.60 billion) from 2.18 billion euros ($2.20). On a comparable basis, the gain was 9 percent, or 1 percent below the 10 percent it expected. “Momentum remained very strong in Western Europe, supported by both local customers and tourists, particularly from the U.S.,” Kering said. “In Japan, revenue rose sharply. Performance in Mainland China was mixed, impacting sales in Asia-Pacific, where overall trends posted a notable improvement. Wholesale revenue rose 2 percent. The rationalization of this channel is now complete.”
Yves Saint Laurent drove the best performance with sales up 40 percent in the quarter to 916 million euros ($922.5 million) from 652 million euros ($656.6 million). Wholesale revenue rose 13 percent on a comparable basis. Bottega Veneta’s sales improved 20 percent to 437 million euros ($440.1 million) from 363 million euros ($365.6 million). Growth was driven by sales in directly operated stores, particularly in Western Europe and Japan, while wholesale revenue fell 5 percent. Revenue at “Other Houses” rose 17 percent to 995 million euros ($1.0 billion) from 849 million euros ($855 million). Sales at Balenciaga and Alexander McQueen were “buoyant across all product categories,” Kering said. Wholesale revenue was down 25 percent as the company reduces this channel exposure.
Kering said revenue in the company’s directly operated store network grew 19 percent on a comparable basis, with all regions posting gains. Western Europe jumped 74 percent, following by Japan at up 31 percent. North America grew just 1 percent, reflecting the high comparison from last year’s base level. Growth in Asia-Pacific was up 7 percent.
For the nine months, Kering’s revenue rose 23 percent to 15.07 billion euros ($15.17 billion) from 12.24 billion euros ($12.32 billion).
“Our ongoing focus on the exclusivity of our brands and on the quality of their distribution are yielding very positive results and reinforce their positioning in their key markets. In an increasingly complex environment, we maintain the required flexibility to support our profitability and sustain our investments in the long-term outlook of all our Houses, Gucci first and foremost,” chairman and CEO François-Henri Pinault said. “We are as confident as ever in the potential and prospects of the Group.”
Third quarter revenue jumped 32.5 percent to 3.136 billion euros ($3.16 billion) from 2.367 billion euros ($2.38 billion). The company in January raised prices—3.5 percent on average across its business lines—and so far hasn’t seen any resistance. It’s looking to raises prices 5 percent to 10 percent next year.
“At the end of September 2022, all the geographical areas posted very strong performances. Sales in group’s stores (up 23 percent) benefitted from the reinforcement of our exclusive distribution network and online sales. Wholesale activities growth (up 26 percent) reflected the resumption of travel retail,” Hermès said.
Ready-to-wear for men and women and accessories, including footwear, saw a 50.7 percent growth rate to 919 million euros ($925.5 million) from 610 million euros ($614.3 million). “The women’s spring-summer 2023 fashion show presented in early October unveiled a collection inspired by a sporting spirit. It received a very warm welcome, like that of the men’s collection in June,” Hermès said.
The silk and textiles division, which includes revenue from scarves, grew 30.7 percent to 208 million euros ($209.5 million) from 159 million euros ($160.1 million). New production capacities at its Pierre-Bénite site in Lyon is helping to produce collections centered around a “diversity of materials, formats and exceptional pieces,” Hermès said. The leather goods and saddlery group, which includes bags and small leather goods, saw a 21.1 percent gain to 1.305 billion euros ($1.31 billion) from 1.077 billion euros ($1.08 billion).
Sales in Asia-Pacific, excluding Japan, rose 47 percent to 1.577 billion euros ($1.59 billion) from 1.073 billion euros ($1.08 billion), while Japan’s improved 14.6 percent to 276 million euros ($277.9 million) from 241 million euros ($242.7 million). Revenue from Europe, excluding France, rose 11.6 percent to 427 million euros ($430.0 million) from 382 million euros ($384.7 million), while French sales were up 10.9 percent to 273 million ($274.9 million) from 246 million euros ($247.7 million). Revenue generated in the Americas jumped 36.4 percent to 536 million euros ($539.8 million) from 393 million euros ($395.8 million).
“The strong performance in the third quarter reflects the desirability of our collections all around the world and the relevance of our values,” Hermès executive chairman Axel Dumas said. “We move forward with confidence and caution while continuing to bolster our integrated model, rooted in France and committed to job creation.”
For the nine months, revenue rose 30.4 percent to 8.611 billion euros ($8.67 billion) from 6.602 billion euros ($6.65 billion). Hermès said currency fluctuations had a positive impact of 451 million euros ($454.2 million) on revenue.