Hermès boosts growth in all regions in 2021
Hermès recorded an exceptional year in 2021, notably growing at unprecedented rates in all its markets. Sales soared worldwide, particularly in America and Asia, the regions that posted the highest revenue rises. But Europe did not lag behind, with revenue back to pre-pandemic levels, especially in France, where sales increased by a whopping 35.2% at constant exchange rates. However, the luxury group’s momentum slowed down at the end of the year, as Hermès was penalized by the renewed Covid surge triggered by the Omicron variant and, in some cases, by stock-outs in the wake of a very successful Q3.
“The geographical distribution [of revenue] has remained well-balanced and virtually unchanged,” said Axel Dumas, head of the Hermès International group, speaking at the presentation of the group's annual results. The Asia-Pacific region remains Hermès’s main market, accounting for 47% of total sales. Japan aside, the region continued to grow vigorously, its revenue increasing by 44.6% at constant exchange rates compared to 2020 and by 65% over 2019. A result that was underpinned by the sustained performance of Greater China, Australia and Singapore, despite new restrictions in some countries within the region, as Hermès stated in a press release. Japan left the Covid-19 crisis behind, and sales in the country rose by 24.9% over 2020 and by 20.2% over 2019. However, in Q4, Asia began to slow down, growing by only 5.7%.
In China, Hermès accelerated the pace of new store openings, a strategic shift for the group in the country, as Dumas indicated. “We have a small number of stores in China that generate high volumes and are very successful. In 2010, we decided to stay selective and to not open in every city, while maintaining an entrepreneurial approach by opening in a new city more or less every year. Before the Covid pandemic, we changed pace by deciding to open two [stores in a city], when possible, or to double the size of some existing stores.”
The stores at Shanghai Plaza 66 and in Suzhou and Ningbo have reopened following renovation and enlargement work, after the store at China World in Beijing did so last spring, while new stores were opened in Macau and Shenzhen. The group is also mulling an opening in Hainan, where luxury sales are booming, notably after labels like Gucci and Saint Laurent established a retail presence there. Balmain was set to open there in January, and Louis Vuitton too is thinking about it.
Hainan Island, off the southern coast of China, where duty-free shopping has been allowed for a decade, has become the premier tourist destination for wealthy Chinese since the start of the pandemic, as restrictions on international travel were imposed. “We are wondering about Hainan, with its special status. We have not made a decision on how to establish ourselves there, because of the amount of duty-free business there. In China, we are focused on growing our duty-paid business, so we will find a way to enter this market, but not in 2022,” said Dumas.
Europe a surprise
America accounted for 16% of total revenue, slightly outperforming Europe, which recorded a 15% share, excluding France (9%). In the USA, Hermès opened two stores last year, one in Troy, near Detroit, in June, the other at the Aventura Mall near Miami in October. In 2021, Hermès did very well in this market, growing by 57% over 2020 and by 24% over 2019. Results that were labelled as “fantastic,” mitigated only by a below-par Q4 (when revenue growth was 10.3%) due to restrictions introduced in several US cities. “We closed down our largest stores there because we have a very stringent health-protection policy,” said Dumas, adding that “since [business] in Q3 was very strong, we ended up with lower inventory at the end of the year.”
Europe (excluding France) was a surprise, its revenue rising by 37% in 2021 (it was up by 10% over 2019, and by 22% in Q4). A recovery that Hermès explained with “a remarkable increase in local clientèle, which partly compensated for a [reduced] tourist presence.” France was equally buoyant, with sales increasing by 35% compared to 2020, though they still failed to reach their pre-pandemic levels, posting a 3% downturn over 2019. Dumas emphasised “the outstanding work that has been consistently done with local customers everywhere, the return of American tourists before Omicron, and a reduced tourist presence that was however compensated by online sales and striking sales volumes in coastal areas and sea resorts.”
Sales in directly owned stores grew by 4% at constant exchange rates compared to 2020 (and by 41 % over 2019), and online sales increased worldwide, as Hermès deployed new services and generated sustained traffic growth. “We have reached a milestone in e-tail, with a very high penetration rate, and 78% of e-tail customers are new customers for [Hermès],” stated Dumas. Even wholesale sales were up, by 24%, despite limitations in the travel retail business.
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