Stock Market Rally Spurs Big Spenders in US and China to Open Wallets... Strong Earnings at Herm?s

The luxury industry, which had slowed due to the global economic downturn, is showing signs of a rebound. Following strong sales at Herm?s, Louis Vuitton Mo?t Hennessy (LVMH) and Burberry have also joined the trend of improving performance.

According to Investing.com on the 17th, fourth-quarter sales last year at France’s Herm?s International were 4.09 billion euros (7.0105 trillion won), up 3% from the same period a year earlier. Excluding exchange rate effects, the growth rate is estimated at 9.8%. By country, sales in Asia led by China rose 9%, and sales in North America centered on the United States increased 12%, driving overall revenue growth. China and the United States are considered key markets for global luxury demand.

Hermes store view. Hermes.

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Annual operating profit last year came to 6.57 billion euros (11.2614 trillion won), and the operating margin was 41%, slightly exceeding the market consensus of 40%. Herm?s also plans to pay a dividend of 18 euros (30,000 won) per share. Axel Dumas, Chief Executive Officer (CEO) of Herm?s, said, “Herm?s is starting this year with confidence.”

Other luxury brands that had struggled amid the economic downturn are also showing a recovery in earnings. Fourth-quarter sales at France’s LVMH Louis Vuitton increased 1% year-on-year, excluding exchange rate effects. Louis Vuitton said, “Sales in Europe were sluggish, but higher sales in China and the United States allowed us to beat expectations for the second consecutive quarter.” The United Kingdom’s Burberry Group, which fell into the red in the third quarter of last year, also saw its fourth-quarter sales rise 3%. In particular, a 6% increase in sales in the Chinese market drove the turnaround in performance.

The luxury industry’s growth had recently slowed due to China’s economic deceleration and the impact of global inflation. However, as the recent stock market rally has boosted the value of financial assets held by the wealthy, high-end consumption is recovering.

Luca Solca, an analyst at U.S. research firm Bernstein, analyzed, “The share price gains of stocks related to artificial intelligence (AI) are translating into a wealth effect, and since the second half of last year, high-end spending by affluent consumers has been increasing.” He added, “Growth in the luxury market is closely tied to stock market trends. If stock prices undergo a correction, luxury brands will again enter a stagnant phase.”

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