In a rare display of weakness, Hermès reported first-quarter sales that narrowly fell short of market estimates, announcing that it will fully transfer the cost of tariffs in the US to its affluent customer base.
Despite a prolonged pause in China, Hermès’s first-quarter sales were still greater than those of its competitors.
Hermès became the most valuable luxury group in the world by market capitalisation at the beginning of the week after LVMH announced a 5 per cent decline in sales in its crucial fashion and leather sector.
The family-run company is relying on its pricing power as one of the most exclusive luxury brands to add a premium to all products sold in the US as it adjusts to the trade war sparked by US President Donald Trump’s tariffs.
This will be in addition to the usual price changes, which this year were between 6 per cent and 7 per cent.
According to Finance Chief Eric du Halgouet, the effect of these duties would be completely countered by raising selling prices in the US starting 1st May. In February, the business raised concerns about potential price increases linked to tariffs.
The business is keeping to yearly production gains of 6 per cent to 7 per cent while maintaining strict control over output levels. Even while it sometimes limits expansion, that has helped the company remain resilient throughout a slump and preserves the special atmosphere surrounding its leather goods.
After Trump’s April tariff pronouncements sent stock markets and the currency falling, the luxury industry is preparing for what may be its deepest slump in years. The industry has been depending on wealthy Americans to spark growth again.
Speaking about China, another significant market that is struggling with a real estate crisis, du Halgouet stated that while he has not noticed any significant improvement, Government initiatives to increase spending were encouraging.
