Hermes announced plans for significant price increases by 5% to 10% in 2023 as a result of growing costs and currency changes, significantly more than in the past. In fact, this comes after a substantial increase in sales during the third quarter with no signs of a slowdown yet.
Hermes, the manufacturer of the Birkin bags, dismissed worries that the post-pandemic boom in the industry could be slowing due to an impending recession as U.S. consumers took advantage of the dollar’s strength in Europe and China returned rapidly. Indeed, this has echoed some bullish remarks earlier this month by competitor Louis Vuitton owner LVMH.
According to Hermes senior vice president of finance Eric du Halgouet, price increases of between 5 and 10 percent will likely occur due to rising costs and fluctuating exchange rates.
Compared to its competitors, who have aggressively raised prices throughout the pandemic, the business has so far been more cautious.
Hermes, which has waiting lists for its coveted handbags that cost upwards of $10,000 and restricts production to maintain exclusivity, raised prices by almost 4% this year and by an average of 1.5-2% in years past. In addition, this can be compared to Chanel’s double-digit price increases.
However, another expression of assurance is that Hermes announced that it would speed up its hiring drive in the second half of the year. Moreover, the company has already added 800 new staff in the first half and has raised compensation for all of its employees in Europe in July.
According to a consensus cited by UBS, sales for the three months ending in September totaled 3.14 billion euros ($3.07 billion), up 24.3% at constant currency rates, exceeding expert forecasts for 12% growth.
The data by Hermes indicate that “the high-end global luxury goods demand is going to normalize in near future”, according to Bernstein analyst Luca Solca. Shares started the day 3% higher.
