Hermès: Thriving Amid a Global Spending Slowdown

For nearly two centuries, French luxury powerhouse Hermès has built its empire on an unwavering commitment to quality, scarcity, and exclusivity. Known for its highly coveted Birkin and Kelly handbags, named after icons Jane Birkin and Princess Grace Kelly, Hermès has continued to thrive even as broader luxury spending slows. By maintaining a reputation for unmatched craftsmanship and rarity, the brand has captured a level of desirability that allows it to outperform much larger competitors in today’s challenging market.

Analysts estimate that Hermès’ iconic Birkin and Kelly bags account for between 25% and 28% of the brand’s total revenue. With limited availability and long waitlists, these bags are more than fashion items; they are investment pieces, often doubling or even tripling in value on the resale market. “They’re also difficult to get, and that adds to the cachet and desirability,” said Luca Solca, senior analyst of global luxury goods at Bernstein. “It’s a sign of distinction, which increases desirability as a consequence.”

Despite having fewer than 300 stores globally, Hermès has held its own against larger luxury conglomerates. In fiscal year 2023, Hermès reported the fourth-highest revenue among luxury brands, trailing only behind LVMH, Richemont, and Kering. In its most recent quarter, Hermès posted double-digit revenue growth, while competitors LVMH and Kering saw sales decline more sharply than expected. Hermès’ share price has risen over 10% since the beginning of 2024, contrasting sharply with LVMH and Kering, which have each dropped by 15% and 40%, respectively.

As global luxury consumers, especially aspirational buyers, pull back on spending amid economic uncertainty, Hermès remains resilient. Though the brand reported slower sales growth across all regions in Q3 2023 compared to the previous year, it noted that customer spending per transaction has increased. High-net-worth clients continue to drive sales, demonstrating a “very high propensity to spend, provided you bring them something that they consider valuable and distinct,” said Solca. “As far as distinction is concerned, Hermès has quite a lot of it.”

Hermès’ timeless appeal is rooted not just in its products but in a business strategy that emphasises quality over quantity. This approach has allowed Hermès to withstand global economic fluctuations and maintain a strong performance, even as other luxury brands struggle. In a market where rarity and craftsmanship command a premium, Hermès has cultivated a legacy that keeps demand strong, proving that exclusivity and enduring quality will always have a place in the luxury sector.