Hermès Keeps Up Its Luxury Exceptionalism

Who knew colorful silk scarves costing hundreds of dollars were recession-proof? 

Hermès reported financial results on Thursday that showed the scarf and handbag maker is doing pretty well — much better than its luxury compatriots, which have struggled to grow thanks to waning demand from Chinese consumers. Kering, the luxury conglomerate behind Gucci, was more on-trend with its own decidedly lackluster financial results.

Handbag Fight

Hermès’ secret ingredient is that it’s at the very high end of high-end shopping. The company makes prospective handbag owners put themselves on waiting lists and spend a certain amount of money on its products before they can be considered for one of its Birkin bags. That strategy maintains a certain pipeline of demand the company has been able to fall back on even as China’s consumer sentiment has grown a tad more frugal. One McKinsey advisor told Business Insider Hermès has always baked scarcity into its brand, and that has paid off with a long-term strategy that doesn’t feverishly chase after growth.

Kering’s tribulations, however, are much more representative of the overall luxury market:

• Hermès has been consistently outperforming other luxury brands this year. Its stock is up 8% year-to-date, while Kering’s is down a sobering 40%.
• Mega luxury conglomerate LVMH’s stock is down 14% so far this year, and last week it announced its first drop in sales since 2020. Meanwhile, Burberry is down almost 46%, and Hugo Boss was down over 35%. 

Astronauts and the Devil: There are a couple other luxury brands that have also managed to swim against the current: Switzerland’s Richemont — the company behind Cartier — is up 10% so far this year, and Prada is up 25%, with analysts upbeat about its own upcoming financials. On top of that, earlier this month Prada announced a partnership with aerospace company Axiom Space to design a spacesuit for astronauts to return to the moon. If any stock is going to the moon, it’s Prada.