[Asia Economy Reporter Eunmo Koo] Hermes posted results in the fourth quarter of last year that met market expectations. Now, market attention is shifting from the earnings to the impact of the novel coronavirus disease (COVID-19).

According to Samsung Securities on the 1st, Hermes recorded sales of 1.87 billion euros in the fourth quarter of last year, up 13.4% compared to the same period last year, meeting market expectations. By region, Europe grew 9.4%, the U.S. 20.4%, Asia-Pacific 16.7%, and Japan 6.8% year-on-year, showing growth in all regions. Samsung Securities analyst Eunhye Lim explained in a report on the day, “Although sales growth in the Asia segment slightly slowed due to a decrease in travelers caused by prolonged protests in Hong Kong, we confirmed stable operating performance across all regions despite various adverse factors in the luxury sector, based on the strength of the unrivaled high-end brand.”

The performance by business division was also evaluated as flawless. The core leather division (49% of total sales) showed strong growth with a 12.3% increase compared to the previous year. This was attributed to the effects of price increases and sales growth. During the same period, the apparel and accessories division grew 19%, and the silk segment grew 8.9%. Analyst Lim explained, “Not only the flagship handbags but also hit products appeared in the shoes and accessories segments, driving growth.”

Now, investors’ focus is more on the impact of COVID-19 than on earnings. Analyst Lim reported, “Hermes temporarily closed 11 stores in mainland China and 4 stores in Macau due to safety concerns but has recently reopened all but 4 stores,” adding, “However, visitor numbers have not normalized.” She also mentioned that purchases by travelers have decreased due to the decline in Chinese tourists. Lim noted, “During the SARS (Severe Acute Respiratory Syndrome) period, the decline in sales in the Hong Kong region was offset by increased demand in Japan,” and forecasted, “The impact of COVID-19 going forward will depend on the spread patterns by country and region.”

It is advised to be cautious about the slowdown in sector valuation. Hermes has provided guidance for this year expecting sales growth of 7-8% compared to the previous year. Over 80% of products are produced locally in France, so there are no production disruption issues, but as COVID-19 continues to spread globally, the possibility of a contraction in consumer spending is increasing. Analyst Lim said, “The first half of the year will especially be affected,” but added, “However, the relative impact compared to peer companies is limited.”

This content was produced with the assistance of AI translation services.