Hermès International Société en commandite par actions (RMS) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Q3 Analyst Conference for Hermès International. I now yield the floor to Eric du Halgouët, CFO; and Antoine Riou, Head of Investor Relations. Gentlemen, over to you.

Thank you very much. Good morning, one and all. Thank you very much for joining us. In the third quarter, sales continued to grow and reached EUR 3.9 billion, up 10% at constant exchange rate, a slight improvement compared to Q2, particularly in Europe, Americas and Asia. Hermès kept the course, thanks to solid growth in spite of a high comparison basis. Indeed, Q3 sales last year were slightly above that of Q2. The group's consolidated revenue amounted to EUR 11.9 billion at the end of September 2025, up 9% at constant exchange rates and 6% at current exchange rates. Currency fluctuations represented a negative impact of EUR 254 million on revenue. At the end of September 2025, the Leather Goods and Saddlery and the Other Hermès sectors achieved solid growth. The Ready-to-wear and Accessories and Silk and Textiles sectors accelerated in Q3. Hermès is maintaining its course, thanks to solid growth, thanks to our investment, thanks to our creation of jobs to support our growth. For 2025, our outlook remains unchanged. The group confirms its ambitious growth target for revenue at constant exchange rate and continues to grow with confidence. Over to Antoine for the geographical and métier breakdown.

Good morning, one and all. Moving to the geographical breakdown and the evaluations will be given at constant exchange rate. As Eric mentioned, at the end of September 2025, all the regions posted growth. First of all, Asia, excluding Japan, is at plus 4%. With strong growth in Greater China in the third quarter, the region benefited from the house's value strategy, the loyalty of local clients and the qualitative development of the network. The renovated and expanded store at the Central Embassy mall in Bangkok reopened in January, followed by the Taichung store in Taiwan at the end of March. In June, the renovated and expanded Four Seasons store in Macau reopened its doors, followed by the Galleria mall store in Seoul in August. Japan, plus 15% after a solid Q3, maintained a sustained growth, driven by the loyalty of local clients. Americas plus 13%, still a strong momentum with a slight acceleration in Q3, thanks to the U.S. The new Scottsdale store in Arizona opened in September, and then we had Nashville in Tennessee last week. In Mexico, the Molière store reopened in early October after renovation and expansion work. Europe, bar France is at plus 12%. So solid growth there in all the countries of the region. France, plus 9% with still strong activity in all the stores. In Italy, the Florence store reopened in February after renovation and expansion work. The other area, plus 15%, which mainly includes the Middle East, pursues its momentum. Moving on now to the métier or the division breakdown at constant exchange rate. Leather Goods and Saddlery post great performance with plus 13%, in line with its annual trajectory, supported by strong demand for iconic products and new collections. The new equestrian-inspired models, Tablier Sellier and Besace Trotting as well as the return of the iconic Plume are enjoying great success. The increase in production capacities continues with the opening of the 24th leather goods workshop in L'Isle-d'Espagnac in the Charente region in September. Over the next 3 years, three additional leather goods workshop will open: Loupes in 2026, Charleville-Mézières in 2027 and Colombelles in 2028. They will be reinforcing the 10 centers of expertise located across the national territory. The Ready-to-wear and Accessories sector posts a strong growth at plus 6%, continues on its strong momentum with speed up in Q3. The Men's spring-summer 2026 show held at the Palais d’'Iéna was very well received. And in September, we presented the autumn-winter 2025 collection. And the women's spring-summer 2026 collection was successfully unveiled in early October at the Garde Républicaine. Silk and Textiles, plus 4%, good growth supported by bold creations, exceptional materials and diversity of formats. Perfume and Beauty is at minus 5%. It's impacted by a high comparison base due to last year's launch of Barénia. The Perfume collections have enhanced with two new Eaux de parfum intense this year, Terre d'Hermès and Barénia. In a challenging environment, the Watches métier continues its development with the success of the new versions of the Hermès H08 line and the reinterpretation of its iconic complication, Le temps suspendu. In July, Hermès also announced plans to strengthen its production capacity with the expansion of its Noirmont watchmaking site by 2028. The Other Hermès Sectors, Jewellery and Home universe continued to deliver strong growth at plus 11%. The eighth Haute Bijouterie collection, Les formes de la couleur, was presented in July in Tokyo. And at the end of May, Hermès also announced the first stone being laid down for the new Couzeix workshop dedicated to Tableware. Thank you very much. Now we're happy to take your questions.

[Operator Instructions] We have Charles-Louis Scotti from Kepler Cheuvreux.

I've got two questions. First of all, could you give us an update on trading and an outlook on Q4 because the organic revenue has increased by EUR 350 million, in line with Q2? Do you think that you can keep that pace in spite of a comparison basis, which will be more complicated for Q4? Could you tell us a bit more about your confidence going forward, especially for Greater China? And then on the leather goods growth, it has slowed down, although it's still in keeping with annual target. Have you built up any stocks in Q3 to support growth in Q4, where the comparison basis will be particularly tough for leather goods?

Well, thank you very much, Charles-Louis. Well, look, as you say, Q4 will be a higher comparison basis. We are, yes, something like EUR 200 million more than in Q3. The trends at early October means that we are confident in spite of this comparison basis. Yes, we're confident across all the regions. Leather goods at plus 13%. That's in keeping with our annual target. And I'll also recall that our deliveries is not linear for our different stores. So it's really delivery effects. And our stocks have been rebuilt and will be at a similar level to that same time last year to prepare for the end of the year and for the Chinese New Year.

Next question from Anne-Laure Bismuth from HSBC.

Two questions on my side. First of all, on the specifics, bar Japan, we've seen a slight increase in the percentage. Is that down to China, mainly? And how do you explain this slight improvement when some of your peers have seen a better improvement in Q3? Is there still less footfall in the stores in China? And second question, have you completed your price increases for next year? And can you tell us more on that?

Okay. So for Asia Pacific, for South Asia, we have seen a speed up in growth. We're looking at double-digit growth in Malaysia, Korea, Australia, and similar growth between Q3, Q4 for Singapore and Thailand. For Greater China now, I'd just like to remind you that we grew over the whole year in 2024. And there, again, this year, we are posting growth since the beginning of the year up until the end of September. So there will be no huge changes in that trend. We continue with our value strategy. There is a slight improvement in Q3 this year compared to Q2. There are two encouraging signs, which make us optimistic from a macroeconomic point of view. First of all, there is more stability in real estate in Tier 1 cities in China. So that's a positive signal. And secondly, we have another reason to be optimistic. It's the pickup of the financial markets in Continental China and Hong Kong, which is also, yes, a good sign. And for the first week of October, which was the Golden Week in Continental China, we saw quite strong and dynamic business. We can't extrapolate this for the whole quarter, but nonetheless, it is encouraging. Regarding, Anne-Laure, your second question on price increases, we have our budget process, which is underway. So it's too early to give you any indication on that. I can only tell you that it will be below the price increase of this year. That's the only indication I can tell you right now that the budget is still under discussion.

Next question, Luca Solca from Bernstein.

My question is on the demand trends for the different segments of your client base. You can see that the most affluent parts of your client base is very dynamic at the moment. I was wondering if this is a trend that will continue in the future. Is it going to also drive demand in China? It seems that wealthy and affluent people are also going to be a key driver there. And then could you give us a little bit more detail on the demand dynamics that you currently see in the U.S.? Is it a demand that is very broad that encompasses the whole customer base? Or is it driven by the more wealthy individuals, given the cryptocurrency market trends at the moment?

Well, first of all, for our Chinese client base. Outside of Greater China, we haven't seen a speed up particularly for wealthy individuals. So the two client bases that we believe are more important -- the most important in Europe and France, it's people from the U.S. and the Middle East who travel over. And we saw it in Q3, a slight uptick when the events between Israel and Qatar were the -- probably the tensions were at its highest. But yes, we've gone back to normal levels since then. Now as you've seen Silk, which is a volume-driven division and clothing and fashion accessories that has sped up a little bit. And we've seen these divisions benefit from a slightly higher footfall, including in the U.S. And now, Luca, your second question. So we had very good Q3 in the U.S. growth that was driven by jewelry, silk, shoes, watches, by pretty much all of the divisions, an increased footfall and also a growth that is well distributed between the East and the West Coast. Over and beyond the U.S., Mexico and Brazil also have sped up their growth. And also a reminder, the U.S. is a country where we'll be focusing our development. And in October, we opened a store in Nashville, Tennessee. And so we're going to continue to focus the development of our network in the U.S.

Next question, Thomas Chauvet from Citi.

Two questions. Question number one on Ready-to-wear and Accessories. Grace Wales Bonner was appointed yesterday to follow up from her predecessor. A lot has been said, but is it going to mean a more modern, more casual look to the men's ready-to-wear collection? And how much does the menswear weigh in the total revenue? And second question on Perfume and Beauty, which was at about 3% of the revenue. It's about, what, EUR 500 million over the whole year. This is a business which is more and more strategic for other players in the luxury industry. What is the weight of makeup 5 years after its launch? And are you thinking about floating a new line of care products? Are you happy with the profitability of this venture into makeup? And tell us a bit more about the vertical integration for perfumes.