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.