Hermes Continues Outperforming on Strong Brand, Lower Cyclicality, and Pricing

We believe wide-moat Hermes International has carved out a unique niche in the luxury goods industry, which will provide it with continuing superior returns on capital. Hermes’ iconic leather bag styles (part of the more than EUR 5.5 billion leather goods segment) are in limited supply, supporting the brand’s exclusivity perception and providing the company with demand visibility and significant pricing power. Hermes Birkin and Kelly bags are sold in secondary markets and auctions for significantly higher than the initial purchase prices—an impressive feat for soft luxury goods.