French luxury brands regain their luster despite the Covid-19 crisis

The enthusiasm of Asian customers for luxury has increased further this summer, offering the French giants of the sector, LVMH and Hermès, the opportunity to shine again in the third quarter. Over the first nine months of the year as a whole, sales are nevertheless down compared to 2019.

After LVMH at the end of last week, it is Hermès which published this Thursday, October 22 the figures of its sales between July and September. The latter started to rise again compared to the second quarter with a total amount of 1.8 billion euros in the third quarter, against 982 million in the second (+ 83%). For LVMH, the increase was also spectacular: 7.7 billion in sales in the second quarter against 11.9 billion in the third (+ 52%). Kering is due to unveil its own figures on Thursday after the markets close.

For the two giants, sales picked up again mainly thanks to Asia. “The luxury sector is doing very well. The Asian sphere is very powerful, in particular in China where those who could not come to buy in Europe still made their purchases on the spot ”, underlines with AFP Arnaud Cadart, portfolio manager at Flornoy.

    Hermès brings "further unequivocal proof", after LVMH, "that the demand for luxury products has concretely recovered this summer, and this even if intercontinental travel is practically non-existent", also observes Luca Solca, Luxury analyst at Bernstein.

Savings redirected to luxury spending

At Hermès, Asia ex-Japan saw an increase of 25.2% on a reported basis, with a "remarkable performance from mainland China, Korea, Australia and Thailand" and a recovery from Japan ( + 8.1%). The continent also supported the world leader in luxury, LVMH, with a 13% increase in organic growth in the third quarter. And over nine months Asia represents 34% of the group's revenues.

If the Far East clearly plays the role of locomotive, the two heavyweights have also found other relays. "The most accessible products from the most recognized brands have been a hit" in Europe and the United States as well, notes Arnaud Cadart. Because "in a crisis phase, this is where people come to have fun and spend the savings that were not used to travel, to go to the theater or to the restaurant".

In addition, “Hermès has reaped the benefits of its investments in online sales,” notes Arnaud Cadart. "E-commerce has become our first store in the group with growth" which is "close to triple digits", thus assured the financial director of Hermès, Eric du Halgouët.

A horizon still uncertain

On the stock market, investors clearly welcomed these results, with a bonus for the first to surprise, namely LVMH which jumped 7.34% on Friday in the wake of its results, dragging the entire sector in its wake. .

This Thursday, on the Parisian square, Hermès was one of the rare values ​​in the green. Its shares even sign the best performance of the CAC 40 since January 1 with an increase of more than 23%.

If the improvement is clearly there, the after-effects of the pandemic have not been completely erased and are more visible over nine months: with 4.288 billion euros, Hermès sales thus decline by 14.4% compared to the same period in 2019, while those of LVMH fell by 21% to 30.348 billion euros.

The two groups have also refrained from any triumphalism. "The economic and financial strength of Hermès allows the group to go through this crisis with serenity", assured Eric du Halgouët, while preferring to remain "cautious". For its part, LVMH had assured that "in a very disturbed context, marked by uncertainties, the group will continue to be vigilant".

The hope of Christmas

The latest news on the health front "weighs on confidence. China has clearly restarted, but it cannot function on its own, ”believes Arnaud Cadart. However, according to him, “the fourth quarter is that of the end of year celebrations, synonymous with massive purchases among Westerners. However, deprived of travel, people could continue to reorient themselves towards luxury, ensuring a good resistance to these last three months ”.

In 2019, LVMH recorded sales up 12% in the fourth quarter compared to the same period of 2018, to reach 15.2 billion euros. For Hermès, it was + 10.7% (1.8 billion euros) over this same period compared to that of 2018 and + 11.4% for Kering for a total sales of 4.3 billion euros (at constant exchange rates for both).

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