Recently, a number of leading luxury goods groups announced their financial data for the third quarter of 2023. As shown in Figure 1, compared with LVMH, Kering and Richemont, Hermès Group led the performance growth rate in the first three quarters of this year, with a comparable operating income growth rate of up to 22%, and completed 10 billion euros of revenue in the first three quarters, close to ninety percent of the annual revenue scale of the previous fiscal year, further narrowing the gap with Kering and Richemont. This article will combine the other three luxury groups to understand the overall performance of Hermès Group in the first three quarters of 2023 from the aspects of operating income, net profit and store opening.
Figure 1 Luxury goods group's operating income in the first three quarters of 2023
1. The revenue of all regions and categories has risen generally, and the growth rate is eye-catching
In the first three quarters of 2023, all segments of the Hermès Group achieved growth in operating revenue in all regional markets, and the growth rate was more impressive than that of the other three luxury groups.
(1) Revenue growth in the Asia-Pacific region was significant, while the Americas market rose "against the trend".
In terms of regional markets, in the first three quarters of this year, LVMH Group, Richemont Group and Hermès Group all had double-digit growth in the Asia-Pacific region, of which Hermès Group was in the forefront with a growth rate of 21%. In the Americas, where the other three luxury groups have performed mediocre or even "folded", the Hermès Group has also achieved a 20% revenue growth. Overall, the Hermès Group not only achieved above-average results in the Asia-Pacific region, where other luxury groups performed well, but also bucked the trend in the Americas, where the rest of the regions grew by around 20%.
Figure 2 Hermès Group's operating income in the first three quarters of 2023 (by region, billion euros)
Figure 3 LVMH Group's performance growth in different regions in the first three quarters of 2023
Figure 4 Richemont's operating income for the first three quarters of 2023 (by region, billion euros)
Figure 5 Kering's operating income for the first three quarters of 2023 (by region, billion euros)
(2) Significant growth in revenue across all categories
In addition to the general increase in revenue in all regions, all sub-categories of the Hermès Group performed well. In the first three quarters of this year, the performance of different business lines of the three integrated luxury goods groups was differentiated, such as the decline in the performance of LVMH's wine division, the sluggish watch business of Richemont, and the stagnation or contraction of all businesses of Kering except for the eyewear division. In contrast, the Hermès Group behaved more like an "honor student" with no shortcomings, with the exception of the perfume and beauty division, which achieved single-digit growth of 8%, and the rest of the categories achieved revenue growth of about 20%.
Figure 6 Hermès Group's operating income in the first three quarters of 2023 (by segment, 100 million euros)
Figure 7 LVMH Group's operating income in the first three quarters of 2023 (by segment, EUR billion)
Figure 8 Richemont's operating income in the first three quarters of 2023 (billion euros by segment)
Figure 9 Kering's operating income in the first three quarters of 2023 (billion euros by brand)
Second, the net profit margin has risen steadily, and the profitability is at the forefront of the industry
In addition to its outstanding performance in terms of revenue, the Hermès Group has also outperformed its competitors in terms of profitability. LVMH's net profit margin improved slightly in the first half of the year, while Kering's and Richemont's net profit margins declined, while Hermès Group's net profit margin was 3 percentage points higher than that in the first half of 2022, with higher net profit margin growth and net profit margin than the three luxury groups. Although there is still a certain gap between Hermès Group and Kering Group and Richemont Group in terms of operating income, its net profit scale has surpassed that of the two luxury groups in the first half of this year, and its profitability can be seen.
Figure 10 Net profit and net profit margin of luxury goods group in the first three quarters of 2023
Third, the expansion of stores is cautious, and only one new store has been added in China
Table 1 Number of new stores added by luxury groups in the first half of fiscal year 2023
Under the performance of Hermes Group's revenue and profit, its store expansion strategy is more cautious. As shown in Table 1, in the first half of 2023, LVMH, Kering and Richemont added 56, 35 and 27 stores respectively, while Hermès Group only opened 2 new stores, maintaining a total of around 300 stores, much lower than the other three. From the perspective of store locations, compared with the channel sinking strategies of the other three luxury groups in the Chinese market, Hermès Group has only added one new store in Tianjin so far this year, and on the whole, its store location is basically limited to second-tier cities and above.
Figure 11 Sinking channels in the Chinese market
Fourth, summary
In general, compared with LVMH, Kering and Richemont, Hermès Group has performed better in terms of operating income and net profit in the first three quarters of this year, and its sales channels have shown a more conservative store expansion strategy than the other three luxury groups. After the end of 2023, let's wait and see how the financial performance of each luxury group will be.
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Source: China Treasure Association Fund WeChat public account