After LVMH, L’Oréal and Kering, Hermes International, one of the four luxury-beauty values of the CAC 40 lifted the veil this morning in its first quarter. The benchmark for luxury leather goods has limited breakage by recording a 7.7% drop in turnover at constant exchange rate to 1,506 million euros, increasing its share by 2% in the early afternoon on the Paris stock exchange.
During the January-March period, the group’s decline in activity was severe in Europe (-11%), in France (-9%), and in Asia (-9%), less pronounced in the United States (- 6%) while Japanese sales increased slightly by 1%.
Impacted by the paralysis of its stores in mainland China from the end of January after an excellent start, Hermès then recorded a rebound in activity in the country last month. In Hong Kong and Macao, the saddler was also able to count on the growth of its digital sales channel.
While most of its businesses have stalled, clothing and the silk and textiles department were the most affected (-11% and -19% respectively). Conversely, “the other trades” performed well, growing by 4%, “ thanks to the jewelry “, Specifies the group.
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For Hermès, the hard part is yet to come
The 2e quarter will no doubt be less lenient: the group is now facing a second wave of coronavirus in certain countries in the Asia-Pacific zone, notably in Singapore, Thailand and Australia, while April in Europe and in the United States – at the height of containment – looks particularly bleak, and that Japanese sales are slowing.
To date, ” only stores in Greater China and Korea are open while activity is very limited in Japan. The evolution of the pandemic and the measures decided by the States do not allow at this stage to predict the dates of reopening of the stores. Consequently, sales in the 2nd quarter of 2020 will be strongly impacted by the closings of a significant part of the network “, warns Hermès.
In order to cross this year with as much ammunition as possible, the group reduced the amount of its dividend for 2019 (from 5 to 4.55 €) and announced that its managers will not benefit from an increase in their remuneration – fixed as variable – in 2020.
Better resilience than Kering and LVMH in the face of the crisis
However, the group can boast better resilience than its competitors LVMH and Kering, who are more exposed to retail. The first showed a contraction of 17% of its turnover in the 1er quarter, marked by a significant drop in selective distribution (Sephora, etc.) and watches and jewelry (-26%). Fashion and leather goods fell to that of Hermès (-10%).
At Kering, sales fell 16.4%, pulled down by its flagship Gucci (-23.2%), which is particularly dependent on Asia-Pacific and Chinese tourism customers worldwide. Saint-Laurent is down 13.8% – the other brands in the group are declining more moderately and Bottega Veneta is even up 8.5%, on a good streak over the past six months due to a change in artistic direction.
Hermès is however “worse” than L’Oréal, operating in a beauty-cosmetic market relatively spared by containment measures (-5%) compared to that of luxury. The French make-up giant “outperformed” its sector, registering a drop of 4.8% in the first three months of the year. L’Oréal is also the only one of the four groups to have delivered a quantified financial projection for 2020, counting on a contraction of 5% of its turnover.
Evolution of luxury-beauty actions on the CAC 40 since January 1, 2020
- Hermès + 3%
- L’Oréal -6.8%
- LVMH -16%
- Kering -22.3%
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Read also: “How to buy and sell Hermès shares”
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