Written by Brenda Nakalema

Hermès sales rose 42% last year but stock is down.

On Friday, the French luxury brand posted a 42% spike in revenue 2021 to the tune of nearly €9 billion, …

On Friday, the French luxury brand posted a 42% spike in revenue 2021 to the tune of nearly €9 billion, owing to its strong sales in North America.

The revenue from Hermès (ticker: RMS. France) was roughly 33% higher than their previous pre-pandemic levels last year. Despite this, sales in the previous quarter of the year were slightly below market expectations, especially amidst the self-imposed production constraints the group adheres to despite the sky-high demand for its high-end bags.

In order to maintain both quality and exclusivity of its product, Hermès has maintained strict production quotas even with the long waiting lines for customers willing to spend record amounts of money on its famed Birkin or Kelly bags. The company caps volume growth in its leather goods production at 6%- 7% annually.

“It takes 15 hours for a Hermès bag to be made. Even if there’s an increase in demand, I’m not going to start doing them in 13 hours to raise production,” said company chairman Axel Dumas.

The groups recruits an average of about 400 artisans per year- but not many more, given the time it takes to train them,” Dumas added.

In comparison to its rivals, most notably Vuitton bag maker LVMH and Gucci owner Kering, sales in the company experienced a drop during the festive season. From an overall perspective, sales rose $2.71 billion in the last three months of last year, with growth being driven mainly by U.S and Chinese shoppers. “Hermès is one of the last large-cap luxury stocks to report, and this does not quite echo recent results from LVMH, Kering and Richemont.” Said Citi in a report. On top of this, investors might have been disappointed by the company’s failure to pay a dividend, which many were expecting.

The Hermès leather goods and saddlery division, which also includes its famous Berkin and Kelly handbags, and accounts for almost half the total sales revenue, dropped in sales by 5.4% over the time period.

Hermès reported a price increase amounting to roughly 35% this year due to its higher production costs in Europe. LVMH (ticker: MC.France) increased its prices by 7% earlier this week.

Hermès shares dropped more than 4% in Friday morning trading. The stock, however, is up 28% over the previous year. Kering (ticker: KER. France) climbed by a similar amount over the same time period, while LVMH is up 27%. Still, Hermès managed the Covid 19 pandemic better than most of its rivals, with its sales growing from 33% to 42% between 2019 and 2021.

sales rose 42% last year but stock is down.

On Friday, the French luxury brand posted a 42% spike in revenue 2021 to the tune of nearly €9 billion owing to its strong sales in North America.

The revenue from Hermès (ticker: RMS. France) was roughly 33% higher than their previous pre-pandemic levels last year. Despite this, sales in the last quarter of the year were slightly below market expectations, especially amidst the self-imposed production constraints the group adheres to despite the sky-high demand for its high-end bags.

In order to maintain both quality and exclusivity of its product, Hermès has maintained strict production quotas even with the long waiting lines for customers willing to spend record amounts of money on its famed Birkin or Kelly bags. The company caps volume growth in its leather goods production at 6%- 7% annually.

“It takes 15 hours for a Hermès bag to be made. Even if there’s a lot of demand, I’m not going to start doing them in 13 hours to raise production,” said company chairman Axel Dumas.

The groups recruits an average of about 400 artisans per year- but not many more, given the time it takes to train them,” Dumas added.

In comparison to its rivals, most notably Vuitton bag maker LVMH and Gucci owner Kering, sales in the company experienced a drop during the festive season. From an overall perspective, sales rose $2.71 billion in the last three months of last year, with growth being driven mostly by U.S and Chinese shoppers. “Hermès is one of the last large-cap luxury stocks to report, and this does not quite echo LVMH, Kering and Richemont’s recent results.” Said Citi in a report. On top of this, investors might have been disappointed by the company’s failure to pay a dividend, which many were expecting.

The Hermès leather goods and saddlery division, which also includes its famous Berkin and Kelly handbags, and accounts for almost half the total sales revenue, dropped in sales by 5.4% over the time period.

Hermès reported a price increase amounting to roughly 35% this year due to its higher production costs in Europe. LVMH (ticker: MC.France) increased its prices by 7% earlier this week.

Hermès shares dropped more than 4% in Friday morning trading. The stock however is up 28% over the previous year. Kering (ticker: KER. France) climbed by a similar amount over the same time period, while LVMH is up 27%. Still, Hermès managed the Covid 19 pandemic better than most of its rivals with its sales growing from 33% to 42% between 2019 and 2021.