Hermes will fully shift the burden of U.S. tariffs to its wealthy clientele. The company announced this on Thursday, after it posted first-quarter sales that slightly missed market expectations.
Hermes is banking on its pricing power as one of the world’s most exclusive luxury brands. Hermes plans to add a premium to all products sold in the United States, which will come on top of regular price adjustments of around 6%-7% this year.
Finance Chief Eric du Halgouet said, “We are going to fully offset the impact of these new duties by increasing our selling prices in the United States from May 1, across all our business lines.” The company had flagged possible tariff-related price hikes in February.
The brand, known for its Kelly and Birkin handbags that fetch upwards of $10,000, reported sales of 4.1 billion euros ($4.66 billion) for the three months ending in March. This is a 7% rise on a constant currency basis.
The performance fell below analyst expectations. Analysts expected 9.8% year-on-year growth, according to a VisibleAlpha consensus estimate cited by HSBC, slowing from an 18% surge in the previous quarter.
Hermes’s first-quarter sales follow LVMH reporting disappointing figures. However, Hermes still posted positive growth across all regions, partially hampered by low inventories.
The company is keeping a tight grip on output levels. They are sticking with production increases of 6% to 7% each year, which helps maintain the exclusive aura around its leather goods.
Speaking to journalists on a call, du Halgouet said that going into April, the company has not observed any significant change in shopper behaviour in the United States. The company still saw double-digit growth there.
He added, “Of course, we are cautious about the United States given the discussions, the geopolitical uncertainty which, as you know, have caused a great deal of volatility on the financial markets.”
The U.S. tariffs could include a 20% charge on European fashion and leather goods and 31% for Swiss-produced watches if fully applied. Last week, Trump paused most of his tariffs for 90 days, setting a general 10% duty rate instead.
Commenting on China, another key market, which is weighed down by a real estate crisis, du Halgouet said he has not seen any major signs of improvement. He added that recent government efforts to boost spending were a positive signal.
In Europe, sales grew 13.3% because travelling Americans benefited from a strong dollar at the start of the year. Du Halgouet cautioned the positive trend might not last as the dollar has since weakened.
The family-controlled company this week took LVMH’s crown as the world’s most valuable luxury group by market cap. This happened despite much lower overall revenues and corporate size.
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