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Hermes International SA RMS

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Morningstar’s Analysis

Valuation
Currency in EUR
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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Hermes Delivers Very Strong First-Quarter 2021, Fair Value Estimate Increased to EUR 472

Jelena Sokolova, CFA Equity Analyst

Analyst Note

| Jelena Sokolova, CFA |

We are increasing our fair value estimate for wide-moat Hermes shares to EUR 472 from EUR 439 as the company reported impressive sales growth in the first quarter against depressed 2020, and also more challenging 2019, levels. Revenue was up 44% at constant exchange rates against 2020 levels and up 33% against 2019 as continuous revenue weakness in Europe due to coronavirus lockdowns and a lack of tourists was more than compensated for by strong spending growth in Asia (up 74% versus 2020 and 64% versus 2019) and Americas (up 23% versus 2020 and up 15% versus 2019). Hermes’ strong growth was still below the 37% increase versus 2019 levels for LVMH’s fashion and leather goods division, but markedly better than single-digit two-year stack growth at peer Kering. In what looks like a strong V-shaped recovery for luxury demand, less fashion-orientated, timeless brands like Hermes seem to be outperforming.

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Company Profile

Business Description

Hermes is a 180-year-old family controlled luxury goods company best known for its Birkin and Kelly bags. Its biggest segments are leather goods and saddlery, accounting for around half of revenue; clothes and accessories (22% of sales); silk and textiles (9%); and other products such as perfumes, watches, jewellery, and home furnishings. Hermes has a record of smooth sales growth, with no sales decline over the past 10 years. It has around 300 stores globally, of which it owns and operates 219.

Contact
24 rue du Faubourg Saint Honore
Paris, 75008, France
T +33 140174920
Sector Consumer Cyclical
Industry Luxury Goods
Most Recent Earnings
Fiscal Year End Dec 31, 2021
Stock Type
Employees 16,600

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