Hermes will raise US prices to fully offset Trump's tariffs, company says
France's Hermes will fully shift the burden of tariffs in the United States to its wealthy clientele, the company said on Thursday, as it posted first-quarter sales that slightly missed market expectations.
Banking on its pricing power as one of world's most exclusive luxury brands, Hermes plans to add a premium to all products sold in the United States, coming on top of regular
price adjustments, which were around 6 percent-7 percent this year.
'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,' said Finance Chief Eric du Halgouet. The company had flagged possible tariff-related price hikes in February.
The brand known for its Kelly and Birkin handbags, which fetch upwards of $10,000, reported sales for the three months ending in March of 4.1 billion euros ($4.66 billion), a 7 percent rise on a constant currency basis.
The performance fell below analyst expectations for 9.8 percent year-on-year growth, according to a VisibleAlpha consensus estimate cited by HSBC, slowing from an 18 percent surge in the previous quarter.
Hermes's first-quarter sales follow sector bellwether LVMH reporting disappointing figures, even though Hermes still posted positive growth across all regions, which was partially hampered by low inventories.
Keeping a tight grip on output levels, the company is sticking with production increases of 6 percent to 7 percent 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 behavior in the United States, where it still saw double-digit growth.
'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,' he said.
The US tariffs could include a 20 percent charge on European fashion and leather goods and 31 percent for Swiss-produced watches if fully applied. Last week, Trump paused most of his tariffs for 90 days, setting a general 10 percent 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, but added that recent government efforts to boost spending were a positive signal.
In Europe, where sales were boosted by travelling Americans benefiting from a strong dollar at the start of the year, Hermes sales grew 13.3 percent. Du Halgouet, however, 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 valuableluxury group by market cap, despite much lower overall revenues and corporate size.
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