Will Hermè’s Share Price Reach Its ATH When the Company Reports Its Q4 Earnings?
Carolane De Palmas
5 min read
This coming Friday, the 17th of February at 7:00 AM GMT, Hermès is due to report its fourth quarter and full-year 2022 earnings results.
Coming off a very strong third quarter, which saw the company’s sales boosted by over 24%, Hermès is in an enviable position, where it seems to be dodging most of the negative effects of the global downturn so far.
The French family-owned company that employs more than 17,600 employees globally, opened several new stores last year, including its gigantic new flagship location in Madison Avenue, New York, and others in the US, Qatar, and China.
However, considering growing household expenses and worldwide economic headwinds, are Hermès shares a buy ahead of their earnings release this week? Let’s examine the company’s near-term challenges and opportunities and their potential impact on stock performance.
Luxury Goods Companies Sailing Through Tough Times
Hermès International, also often known as Hermès of Paris or just Hermès, is the French manufacturer and retailer of a wide variety of high-end products, from clothing, bags, makeup, jewelry, and much more.
It is a brand that has become synonymous with luxury, and its dominance in this highly competitive space is due to a mix of rich legacy, exquisite workmanship, an eye for detail, and high standards of quality and professionalism across the whole production process.
Typically, companies that sell luxury items to affluent customers are less impacted by rising expenses and unpredictable economic situations like those witnessed last year and into 2023.
Therefore, in the event of a recession in any of their key markets, companies like Hermès have a reasonable chance of preserving their primary source of demand. In spite of the pandemic and its drawn-out aftermath of tightening monetary conditions, the demand for premium, high-quality items has stayed relatively stable.
Another factor to consider is the impact of currency differentials. In order to take advantage of the strength of the dollar, an increasing number of customers from the US and elsewhere have been shopping online for their high-end products in countries where currencies have lately been weaker, such as in the Eurozone. This tendency has provided a welcome boost to Hermès, and customers receive their products at a comparatively cheaper rate.
The reopening of China after the pandemic, a major market for Hermès, is also a huge win for the brand. As an example of the importance of the Chinese market, back in April 2020, after being closed for two months, Hermès’ flagship store in Guangzhou’s Taikoo Hui retail mall stunned the globe with its excellent sales. Reportedly, the Hermès flagship store made the US $2.7 million on its first day back in business, thanks in large part to the sale of a rare and exorbitantly priced diamond Himalaya Birkin bag.
Battle With Online Knockoffs Over for Now
The fashion house has been in the news lately for its involvement in a copyright infringement trial, in which its signature Birkin bag was being depicted and sold in a type of digital artwork called non-fungible tokens (NFT).
On the 8th of February, after having originally filed suit over a year ago, a court jury in Manhattan found that a New York City artist’s NFT replicas of Hermès’ iconic Birkin bags had infringed on the company’s trademark rights.
The jury in one of the first intellectual-property proceedings involving digital tokens decided that artist Mason Rothschild’s unlicensed artworks dubbed ‘metabirkins’ were likely to mislead customers, thus they awarded Hermès a $133,000 court victory.
It was an important case for the sake of luxury brands given the use of fashion NFTs has increased in recent years.
One of the first high-end companies to enter the NFT market was Gucci, back in June 2021. At the time, the Italian fashion brand auctioned off a four-minute video based on its Aria collection for $25,000.
Wearable NFTs featuring Burberry’s Sharky B (from the crypto video game Blankos Block Party) have sold for more than $US375,000 since their introduction, and Dolce & Gabbana also broke records with their $5.7 million unveiling of a nine-piece NFT collection at Venice Fashion Week.
Hermès during court proceedings suggested that the company was intending to enter the NFT space at some future point, but that Rothchild’s works had made this inherently more difficult.
Where to for Q4 and the Company’s Share Price
The stock of the French fashion house has more than doubled in the last five years. It’s also weathered numerous recessions since its first public offering in 1993 and is still one of the world’s most well-known luxury brands.
The near-term outlook for brands such as Hermès is a positive one. According to statista.com, a leading provider of market and consumer data, the worldwide market for luxury goods is expected to expand at a compound annual growth rate of 3.47 percent from 2023 to 2027.
In a letter to shareholders in September, the company said that it was still impossible to predict the effect of the pandemic on the current fiscal year. However, it highlighted Hermès’ highly integrated artisanal methodology, balanced distribution network, creative collections, and client loyalty were enabling them to look forwards with confidence.
Despite the world’s economic, geopolitical, and monetary challenges, the company assured that it would maintain its ambitious target of revenue growth at constant currency rates in the medium term.
Such optimism in combination with other factors such as China’s reopening has led the company’s share price to hit a record high in recent weeks to 1775.00 EUR on the 3rd of February according to ActivTrades’ data about shares trading. As for fourth-quarter results, Tipranks, a financial markets researcher, puts the EPS forecast at $15.47 for the fourth quarter, above the 2021 fourth-quarter EPS of $13.01.
Daily Hermès chart – Source: ActivTrader
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