When scrolling the luxury news during the past few earnings seasons, it is becoming increasingly less remarkable to see the latest autopsy of a global luxury crisis followed by deep dives into the income statement of Hermès that use words like “remarkable” and “resilient.” February 14 was one of those days. Many industry watchers will again be pulling out positive adjectives to describe Hermès’ newly released full-year 2024 results and may also be hoping to receive an orange box with brown trim in their Valentine’s Day stash.
Hermès’ 2024 financial results showed the brand delivering more exceptional growth with annual revenue reaching €15.2 billion, a 15 percent increase at constant exchange rates, and a net profit of €4.6 billion, representing 30.3 percent of sales. Growth was everywhere you could look in all geographies and all product lines apart from watches. Demand from China was noted to be softer but Asia (x. Japan) sales were still up 7 percent with strong growth recorded in Japan (23 percent), Europe (19 percent), and the Americas (15 percent). Product categories such as leather goods (+18 percent), ready-to-wear (+15 percent), and jewelry/home collections (+17 percent) performed well, while watches saw a slight decline (-4 percent) due to a high comparison base. While we read a lot about luxury having weaker pricing power after misusing it for so many years, Hermès remains confident in its pricing strategy (+6-7 percent increase for 2025) and its ability to maintain exclusivity and desirability in the luxury market.
So far this earnings season, most industry central tendency measures of sales growth such as average or median growth have softened, yet the standard deviation has risen.
In the below, I pulled out the earnings for four of the industry heavyweights and indexed them to 2018 level so that we could see some evolution from before, through, and after the pandemic. Coming out of the pandemic, most of the industry realized explosive growth. That growth continued at rates that exceeded historical norms for many brands with Kering a notable exception as poor sales at Gucci began to pull down in 2023 when much of the rest of the business was still growing over 10 percent a year and maintaining strong margins.
Yet, 2024 has been a year of a mini structural break. We were already seeing quite a bit of industry dispersion in 2023, but this year the variance really stands out now that LVMH (about a third of luxury fashion revenues) tipped slightly down.