Hermes Cuts Earnings Forecast: Sign of Apocalypse?

[rach2jlc]

A more fashionable way of saying, "...when HELL freezes over" has usually been "...when Hermes [EDIT:] cuts earnings forecasts." Well, put on your tin hats folks, the end days are near: PARIS — With a worsening outlook for luxury, Deutsche Bank has cut its earnings forecasts on Hermès International by 10 percent and projects slim fourth-quarter sales growth of 7.5 percent, or 0.7 percent in organic terms. “Worsening luxury news flow, in particular from the U.S., suggests to us that Hermès will see a rapid slowdown in growth rates,” analyst Warwick Okines wrote in a report released Monday. The investment firm also trimmed its 2009 forecasts on Burberry Group plc by 12 percent, while saying it has “more confidence” in the London-based firm “relative to other luxury stocks since the business is not coming off peak margins.” It also expects further cost-saving initiatives. Burberry is due to release its third-quarter sales in mid-January, with most other luxury players reporting fourth-quarter figures in the weeks that follow. Deutsche Bank expects Hermès to post an organic sales decline of 3.7 percent in 2009, versus an estimated 10 percent gain in 2008. Hermès has been one of the most immune of Europe’s big luxury players, citing no material slowdown in the U.S. in the third quarter, when it posted organic growth of 17.9 percent. Deutsche Bank maintains a “sell” rating on the stock, with a price target of 63 euros, or $87.38 at current exchange.

 

[Ataturk]

Does that actually say that they lost money? It doesn't sound like it.

 

[why]

They didn't earn as much as they thought they would. Need title change.

 

[rach2jlc]

Oh, semantics, semantics. I was going more for a mantonian doom-n-gloom sort of atmosphere, so sue me...

Nevertheless... the point is still open to discussion... luxury goods are in a very tough spot, as Hermes typically is immune to any sort of economic fluctuations.

 

[why]

Originally Posted by rach2jlc

Nevertheless... the point is still open to discussion... luxury goods are in a very tough spot, as Hermes typically is immune to any sort of economic fluctuations.

Really?

 

[rach2jlc]

Originally Posted by why

Really?
Ummm... yes. But, if it makes more sense to put it in these terms, then I'll add, "It seems in my experience... that Hermes is immune to economic fluctuations."

 

[Fuuma]

Originally Posted by why

Really?

They've been knowing growth even when the **** hit the fan, notably due to the Japanese market that cuts it's fashion budget when the goings get tought but concentrate on a few "prestige" brands like LV et Hermès.

 

[why]

Originally Posted by rach2jlc

Ummm... yes. But, if it makes more sense to put it in these terms, then I'll add, "It seems in my experience... that Hermes is immune to economic fluctuations."
That was an honest question, doll.

Originally Posted by Fuuma

They've been knowing growth even when the **** hit the fan, notably due to the Japanese market that cuts it's fashion budget when the goings get tought but concentrate on a few "prestige" brands like LV et Hermès.
I guess if the margins are high enough.

 

[rach2jlc]

Originally Posted by why

That was an honest question, doll.

Oh... sorry... I was just pissy because Ataturk showed up. That guy gives me indigestion... or maybe it was just the curry I ate. Probably a combination of both.

Friends???

 

[why]

Originally Posted by rach2jlc

Friends???

I was hoping we'd moved past that point.

 

[rach2jlc]

Originally Posted by why

I was hoping we'd moved past that point.

Well, I've already let you keep a toothbrush at my place. That must count for something.

Anyway, as to your earlier question, yeah... in my experience, it seems that Hermes has never had to play the same game that others did during downturns. Like, after 2001, Prada and lots of the other big lux companies ran into major troubles, had to scale back, change distribution/production/pricing, etc.

Hermes has, at least as long as I can remember, never really had to do any of that. They can keep charging $2100 for a leather zip wallet that Prada can't sell at $495.

SO, when Hermes starts to feel a slight pinch or slowing down... it seems to be a bellweather for how badly the industry as a whole is doing.

Personally, I think in the long run it will be a GOOD thing. Hermes isn't going anywhere, obviously, but it will see a need for brands to be creative and produce good products with smart pricing. hermes has become just a little obscene... they've always been expensive, but the pair of shoes that I remember seeing in Tokyo in 2003 or 04 that were about $650 USD were nearly $1000 when I was there last summer.

Finally, I'll be glad to see a lot of these crappier, newer, non-creative brands that flourish in high times disappear entirely. trim the fat, get back to basics, focus on the "core."

 

[why]

Originally Posted by rach2jlc

Finally, I'll be glad to see a lot of these crappier, newer, non-creative brands that flourish in high times disappear entirely. trim the fat, get back to basics, focus on the "core."
I agree. The mid-level **** at the moment is more about shock value than true design. Do we really need a cowl-neck chambray hoody with binocular chest pockets with a modal weft?

 

[rach2jlc]

Originally Posted by why

I agree. The mid-level **** at the moment is more about shock value than true design.
Exactly. How many "premium denim" brands do we really NEED??? I mean, I liked the old days. Other than Levi's or some obscure Japanese stuff that nobody had here, it was Helmut Lang and it was Diesel. I remember when I was much younger showing up once in HL jeans that cost $150. People thought I was nuts. "$150 for jeans!!! OMG!!1!1! You're crazy!!!" We may even see lots of changes in some of the big names. Prada, for example, I think is still laden with nearly a billion $$$ in debt from when they decided to buy up half of the market. Lots of others aren't making much money, either, and haven't had a major success in a fragrance or handbag to help out. Gianfranco Ferre, Versace, Givenchy (especially the menswear), Ungaro... I mean, Stella McCartney? Does anybody pay attention to her anymore?

 

[why]

Originally Posted by rach2jlc

Exactly. How many "premium denim" brands do we really NEED???

I mean, I liked the old days. Other than Levi's or some obscure Japanese stuff that nobody had here, it was Helmut Lang and it was Diesel. I remember when I was much younger showing up once in HL jeans that cost $150. People thought I was nuts. "$150 for jeans!!! OMG!!1!1! You're crazy!!!"

I think premium denim will stay around (not all the mall brands and a lot of the raw denim brands will disappear). It's very American and the pricepoints aren't all that bad. Margins are high and it's pretty safe overall.

But the Ed Hardys and stuff will be gone -- when times get tough, entry-level clubbers won't be buying $50 t-shirts.

 

[Tarmac]

I don't see how they could be totally immune, and the article shows that.