The Luxury Sector Booms Despite Economic Downturn

Hermès Birkin bag

Luxury goods are still in high demand despite the economic downturn caused by the COVID-19 pandemic. Hermès, a well-known luxury brand, has surpassed €200 billion in market value and has become the second-most valuable luxury brand after LVMH, overtaking Swiss drugmaker Novartis. Hermès has rallied about 30% over the last three months and has consolidated its revenue at €11.6 billion, a 29% increase from the previous year.

Reopening of Markets and Increased Sales

The reopening of the Chinese market and the resumption of international travel have contributed to the brand’s success. There has been a resurgence in demand for luxury goods in China as Covid-19 restrictions have eased. Additionally, the return of affluent American tourists to Europe, supported by the favourable exchange rate of the dollar, has contributed to increased sales in prominent luxury markets such as France, Italy, and the UK.

Matte white Hermès Himalaya niloticus crocodile diamond Birkin bag

Exclusivity and Limited Supplies

Hermès has developed a reputation as being one of the most exclusive brands in the world of luxury. Its Birkins and Kellys handbags are constantly in high demand, and some rarer models can even hit hundreds of thousands. However, the demand for these handbags has far outpaced supply. Despite increasing sales, the company has adopted a conservative approach to managing growth, tightly controlling product distribution, and keeping a firm grip on the brand’s handbag supplies.

Expansion Plans

To address the shortage of supply, Hermès is set to inaugurate a new leather manufacturing plant in Louviers, Normandy, as part of its plans to scale up production. This move is expected to improve supplies and meet increasing demand.

Luxury Sector Stock Prices Surge

Luxury stocks have seen a significant surge, despite investors anticipating a challenging period for the luxury sector during economic downturns. Luxury brands have increased their prices, citing both inflation and exclusivity preservation as reasons. Hermès is just one example of several European companies benefiting from the surge in luxury stock prices. This rally has propelled Paris to become Europe’s top stock market, surpassing London, with the gap between the two cities widening this year.

Hermès boutique at rue du Faubourg Saint-Honoré

LVMH and Other Luxury Brands

LVMH, the world’s largest luxury conglomerate, is valued at US$459 billion, making Bernard Arnault the wealthiest person in the world with a net worth surpassing US$200 billion. Tesla owner Elon Musk is now the second richest person in the world with a net worth of US$180 billion.

Conclusion

Despite the economic downturn, the luxury sector has remained resilient, and the demand for high-end designer goods is still looking great. Hermès has emerged as one of the most valuable luxury brands globally, surpassing Swiss drugmaker Novartis. The reopening of markets and increased sales have contributed to the brand’s success, and expansion plans are set to address supply shortages. Luxury stocks have seen a surge, and luxury brands have increased their prices, citing inflation and exclusivity preservation as reasons. As the luxury sector continues to thrive, there is no telling what the future holds for these high-end brands.