Sales Forecast: Hermes International, the French luxury-goods major, is expected to announce revenue of 13.32 billion euros ($14.31 billion) for 2023, according to a survey of 13 estimates compiled by Visible Alpha. This would represent an increase from the company’s revenue of EUR11.6 billion in 2022.
Operating Profit: Analysts predict that Hermes will report an operating profit of EUR5.52 billion for the year, up from EUR4.7 billion in the previous year.
Net Profit: The company is projected to post a net profit of EUR4.03 billion for 2023, compared to EUR3.37 billion in 2022.
Hermes shares have demonstrated strong performance over the past twelve months, with a 19% increase. This growth was supported by positive third-quarter results and an improved outlook for 2023 from peer company Brunello Cucinelli, which targets the same affluent consumer segment. Analysts at Bernstein have noted the positive correlation between Brunello Cucinelli’s performance and the potential success of Hermes.
Key Factors to Consider
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Luxury Industry Outlook: Following a period of exceptional growth during the pandemic, the luxury industry is currently experiencing a slowdown in demand due to inflation and higher interest rates, leading to decreased consumer spending. However, Barclays analysts suggest that Hermes has displayed more resilience compared to its competitors during uncertain times and is expected to outperform the sector in 2024.
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Affluent Consumer Segment: The current economic climate has adversely impacted spending among aspirational consumers. However, higher-end clientele, who have shown greater resilience, seem to be driving the exceptional results of companies like Hermes and Richemont. UBS analysts have suggested that the outperformance of high-end brands can be attributed to their exposure to affluent customers.
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Challenges in China Market: The luxury sector is witnessing a slower-than-anticipated recovery in China, one of its largest markets, due to domestic economic challenges. Nevertheless, the higher-income groups in the country are displaying resilience, which may explain why luxury brands like Hermes continue to outperform. UBS analysts posit that such brands, with their positioning in the high-end segment, are benefiting from this phenomenon.
The exceptional results expected from Hermes in 2023 reflect the brand’s ability to navigate challenging market conditions and maintain strong growth. Investors and industry analysts will keenly watch the company’s performance as it continues to deliver on its promising outlook.