Hermès International Société

Ladies and gentlemen, welcome to the quarterly information report of Hermès International. I'm now going to hand the floor to Eric du Halgouët, CFO, and Alexandre Boucheron, in charge of investor relations. Eric, Alexandre, over to you. Good morning, one and all. Thank you very much for joining this call. Welcome. The group's consolidated revenue at the end of September 2026 amounted to 12.3 billion euros, up 6% at constant exchange rates and 3% at current exchange rates compared to the same period in 2025. The Americas, Japan and Europe, excluding France, achieved particularly dynamic growth. Currency fluctuations represented a negative impact of approximately 310 million on revenue. Third quarter sales continued to grow in Q3 with sales reaching 4.1 billion euros, up 4% at constant exchange rates and 6% at current exchange rates. In spite of... Macro, economical and geopolitical difficulties, all regions posted growth with the exception of the Middle East. I would like to highlight that after a dynamic Q1, sales for the third quarter are equivalent in value to those for the first two quarters of the year, which speaks to the desirability of our collections, the loyalty of our customers and the robustness of our company. The group continued its operational investments globally in both production capacity and the distribution network. Over now to Alexandra, who will give you more detail on the performance by geographical area and by division. Good morning, one and all. We'll start with the geographical breakdown. The figures are presented at constant exchange rate. At the end of September, as Eric mentioned, all regions posted growth, bar the Middle East that recorded a slight drop. To start off, in spite of a more difficult environment in China, Asia, excluding Japan, continues to grow, driven by solid performance in Korea and a speed up in Singapore and Thailand in Q3. Greater China was stable across the period, which is very positive given the backdrop. In April, the new Stanley Tum store opened in Beijing, followed by the renovated and extended stores of Hong Kong Elements and Sogo Fung Sing in Taipei. Finally, the Kaohsiung store in Taiwan and the Taikoli Mall store in Chengdu reopened after renovation and extension work. Japan next, up 11%, confirms solid and steady momentum driven by the loyalty of its local customer base. The new store at Hilton Plaza East in Osaka was inaugurated in May after renovation and extension work before the opening of the new Nagoya location in June. America's plus 13% achieved strong growth across all the countries and divisions. The San Diego store, renovated and extended, reopened in July, followed by the inauguration of new stores, the Plaza del Lago in Chicago and Williamsburg in New York. In Brazil, the Rio de Janeiro store also opened in August. An event dedicated to Petite Ash Creations was presented at the Ala Moana store in Hawaii in August. Europe, excluding France, is up 9%, so strong growth there thanks to the dynamism of Southern Europe. The UK also recorded strong performance in the third quarter, driven by the opening of a new maison at 166 New Bond Street in London, successfully inaugurated on June 16th. France Plus 2% is making progress, supported by the solid performance of Seaside Stores and the loyalty of our local customer base. Middle East, minus 4%, continues to show solid resilience in a geopolitical context that remains complex. Let's now take a look at the different divisions, still at constant exchange rate. At the end of September, the leather goods and saddlery division, whose appeal remains as strong as ever, and the silk and textile divisions posted solid growth. Leather goods and saddlery, plus 10%. was remarkably good from a performance stand view with a strong desirability of both new models and iconic pieces. Our collections have been enriched with the Double Longe, Besace Atelier and Bride de Jour. The increase in production capacity continued with the inauguration of new workshops. This dynamism shows that Hermès is unique. We are driven by the uniqueness of our know-how and by the loyalty of our customer base. We continue to grow our capacity with a 25th Lever Goods Workshop in Loupe, Gironde. Three new Lever Goods Workshops will open in the coming years. Charleville-Mézières in 2027, Colombelle in 2028, and Les Ambelices by 2030. Hermès thus continues to reinforce its footprint in France by developing employment and training in 11 regions across the country. The ready-to-wear and accessory sector is up 1%. Our ready-to-wear collections were very successful, including our show at the Garde Républicaine, which speaks to the vitality of our offer. Silk and textiles up 7%, solid performance there as well, thanks to the richness of its creations in both women's and men's collections. The Carré, Chevaux d'Ephaistos and La Nature en Voyage lend a modern twist to our iconic scars. Perfume and Beauty recorded a slight drop, minus 1%, with an improvement in the third quarter. The perfume collection was enriched by the new Eau de Parfum solar signature, Barignac Pleine Fleur, as well as Ginseng Biloba. Hermès Beauty introduced a lip care ritual with a mask and a balm which was met with immediate success. Watches minus 2% continues to enrich its offering with, for example, the successful launch of the HO8 skeleton model equipped with the latest generation titanium movement unveiled at the last April Watch and Wonders trade show in Geneva. We are continuing to grow our production capacity with the extension of the watchmaking site in Noirmont in Switzerland by 2028. Finally, the other sectors, including jewellery and the home universe, are up 3%. which speaks to our uniqueness and the power of our creation. The jewelry collection into the Hallscape was successfully unveiled in early July in Paris at the Musée des Arts Décoratifs and will be also shown in Shanghai. and was shown in Shanghai in September. Thank you very much and if you have any questions, do not hesitate. Ladies and gentlemen, you can now ask your questions by dialing star 1 on your phone. Please, two questions maximum per person. And the first question comes from Allor Bismus from HSBC. Over to you. Good morning. Thank you very much. My first question is on lever goods. And my question is, what was the driver of the speed up for each region? So what was the driver of regional growth for leather in Q3? And in leather, we're looking at a plus three, plus six percent volumes increase. Is that still a reality? And tell us about the trends in October. Do you think there'll be any changes? And can you give us some regional granularity, please? Well, good morning, Anne-Laure. For Lever, there is no region that is driving the rest. It's pretty much balanced across the board. All regions grew for Q3 in this area. And the second question was what? Oh, yes, on October and trends. No, there's no change in trends compared to what we have seen towards the end of Q3 for all the regions. Just a quick word on leather. and the increase in volumes. Could you confirm that we're at plus 6%? Well, capacity has increased by 6% for 2026. So that, yes, indeed, remains unchanged. Thank you. And the next question is from Erwan Rambour from Goldman Sachs. Hi, good morning, thank you. First of all, I have a question on Europe, bar France. I see that Europe is growing faster than the Americas, which is surprising. Could you tell us to which extent London and the new opening is driving that, or is it because American have come and bought items in Europe rather than in the US. I'm just trying to understand because I was expecting America to perform better than Europe and that's not the case. Second question on your vision on what's happening in China. You told us greater China was stable so I imagine that China mainland is slightly decreasing and that's offset by growth elsewhere. But what's is the most important factor. There was a new tax announced in July. There is the real estate sector. There is also concerns about unemployment. What do you think is the main driver affecting demand for luxury goods and Hermès goods more specifically? Thank you, Erwan. So first of all, on Europe, Europe grew 10% in Q1, 8% in Q2. So we continue to grow in a very consistent manner. All countries in the region are growing, which is great with double-digit growth in some countries such as Italy, for example, UK, Spain, Turkey, Austria, Benelux, Portugal and Greece. So you can see that most countries, especially in Southern Europe, are driving this growth. Back to the specific example of UK, we have a speed up in Q3 which is driven by, of course, the opening of the new Bond Street store. But it has exceeded, let's say, our expectations because this store is bringing in a higher revenue than the store that we closed and the previous one before. So we are not encroaching on the other stores in London and doing better than expected. and then the European clients are those who are buying in Europe and if you look at people who are coming from outside of Europe to buy in Europe we have a few Americans for sure and we also have a lot of Middle Eastern customers who are coming to Europe that was towards the end of the summer which helped us improve our results in both Italy and the UK mainly. So solid growth. And when we look ahead, when we look at the next couple of weeks, we have the inauguration of the Geneva store, which is planned for early November. And then your second question was on China. First of all, it's worth reminding you that the macroeconomic context is not favourable because real estate is down, consumer trust in China is still quite low with a very high savings rate and consumption which remains unchanged. Now what made it a bit tougher is that financial markets dropped slightly over the last few months. So this can be one part of the explanation. And then there was this new tax that was introduced which aims at taxing all offshore goods to the tune of 20% and it's retroactive. So It applies to the three previous years. It has retroactive effects. So that income has to be paid pretty quickly for the last three years. So, yeah, that might speak to the figures in China. I think it's worth looking at the group's performance. At the end of June we're slightly growing in Greater China and with this slight slowdown in Q3 we are pretty much stable compared to last year for Greater China. with a few developments, a slight improvement in Hong Kong, for instance, which remains a dynamic financial hub. Macau is a slightly different picture with clients that... Thank you very much. And just a final word on China. We remain confident on the potential of China for the mid and long run. We've got a very qualitative distribution network there with few stores, but in good locations. We have 31 stores. And as you've seen, we've opened a new store this year and we continue to renovate our distribution network. The next question is from Luca Solka from Bernstein. Good morning, Eric and Alexandra. My first question is on France. Could you please remind us what your exposure to France will be in Q4? and tell us about the stores in France. We've seen the demonstrations that took place last Saturday. So we'd like to try and work out the risk for French stores with the unrest for Q4. Second question now on China. Could you give us a bit more detail on what is currently driving your lower performances there? Is it a problem that has to do with footfall, with fewer people going to the stores or... has it more to do with the fact that the average basket is lower? Or is it something else? Because my feeling is that the tax that you mentioned earlier affects rich people. But when you look at the business side of things, we see that it's the more affordable products that are in fact slowing down. So I'm wondering what your rationale is to explain this. Okay, so first of all, on France, France is growing 4% for Q3. A lot of momentum on the French Riviera, so Monaco, Cannes, but it was a bit slower in Paris, especially during the summer with a drop in footfall, which we believe is linked to the heat wave. Now when you look at our clients, you can see that our local clients are growing and for the export side of things, we have a lot of momentum with a lot of European and American tourists that came to buy in the French stores. What we've also noticed, and I spoke about this for Europe, is that we have Middle Eastern clients who are coming to Europe to shop, but they arrive towards the end of the summer and then left quickly after that. But we are not at the same level as last year for Middle Eastern clients. There is a slight drop in that area. The beginning of October confirmed this slight improvement that we saw in September after a month of August, which was quite slow for Parisian stores. Regarding China now. Oh, sorry, hold on. I forgot to answer your question on the recent demonstrations and events in Paris. First of all, we would like to have a thought for our clients and staff. And the first thing that we did was to protect our staff. And we have reinforced security. Thank you very much. Now, it's too early right now to gauge the impact on our stores and even less so on tourism. We haven't noticed anything different over the last couple of days. It's mainly our store in Marseille that was attacked, which will not be reopening any time soon. But otherwise, We have very few damages. It's Nantes, Lyon and the Georges V display windows that were broken, but nobody broke into these stores. So it's a bit too early to say what kind of impact that will have on our business in the weeks to come. Back to China now. What we see is that it's the volume divisions that are suffering, so fashion accessories, for example, and also watches and shoes. These are the divisions, the métiers that are the most impacted, and it has to do with a drop in footfall. that we have been able to offset with greater value, which is the strength of Hermès with other divisions like jewellery, leather goods and such like. But it's really a matter of footfall more than anything else and the volume-related métier that suffers the most. The next question is from Charles-Louis Coty from Capelaire Chevelu. Over to you. Thank you very much. My first question is on the US. How do you explain the sequential slowdown in Q3 in the US? Growth is driven mainly by price and scope in the US with new openings of stores. or is it in fact driven by volumes? And then my second question is on the division other, more specifically jewellery. Is jewellery now down in Q3, even if fine jewellery compensated to that extent? So tell us about price and volumes for jewellery and fine jewellery. Thank you very much, Charlui. So first of all, on the Americas, overall growth since the beginning of the year speaks to a higher footfall, greater value, so a higher average basket. Thank you very much. That growth was enjoyed by all the divisions and when you take a look at the geographical breakdown, that growth was balanced out between East, West Coast, Mexico, Brazil, so across the whole region. Now, the slowdown that you mentioned comes from two things. First of all, there's a basis effect. We were up 14% in Q3 last year, whereas we were at 12% for the beginning of the year. And there was a slight slowdown in August and in early September. But business is now back to the level of the beginning of the year. So there is no change in trend at the moment. The positive thing for the US is that we are going to have a busy Q4 with Manaset and its opening. That's for the 29th of October. We have a Craft in Time event in Miami and in November we'll be displaying our new fine jewelry collection in New York. So this should lend more momentum to the US in the final stretch of the year. And then your question on jewelry and fine jewelry. So what we see there is that we have successfully launched the ninth fine jewelry collection in July. And that collection will continue to travel around the world. After Paris in July, it was Shanghai in September. And then it will be New York, as I mentioned a minute ago, in November. The division was hit by the slowdown of Greater China. And if you look at the product breakdown, performance remains strong for silver, which is a division where Hermès has always been very good with a strong increase in volumes and Also, good numbers for fine jewellery, so there is strong progress. There was a slowdown, as you mentioned, but that's mainly because of Greater China, and the slowdown affected the intermediary products. But you also need to bear in mind that we are comparing this to high performances and high increases in the past. So you need to bear in mind that we have this high comparison point. So it is a slowdown in the numbers, but it's just a momentary dip, nothing more. So yeah, for jewelry, we are very confident and we have two avenues for growth. First of all, we're going to continue with our vertical integration to increase our production capacity. and to grow fine jewellery. And then we continue to extend our stores precisely because we want to better show off our offering of jewellery and fine jewellery. You probably have seen the Bond Street store where we have a beautiful area dedicated to jewellery and fine jewellery. And the next question is from Jean Danjou from Odobe HF. Good morning, thank you. I was wondering if you have a comparison effect compared to 2025. And could you tell us about the surprising performance of perfume and beauty? Could you give us some detail on why that performance has improved so much? Well, last year, growth for Q3 and Q4 was plus 10%. So it was already a dynamic division. But over and beyond the percentage, you have to look at the revenue for Q3 in value, which is the same as Q2 and Q1. And in Q1, just for reminder, there is the Chinese New Year. So strong growth. Thank you very much. with the launch of a new lipstick and a new range, a clean air. And for perfumes, there was the launch of Un Jardin Sous la Mer and Musque Palida, which is an Hermesence. Hermesence are fragrances that we only sell in the Hermes stores. And then we all launched... and another Hermesence, Bilbois. So there were a lot of launches for Q3 for perfume and beauty. The business remains very dynamic in our stores for perfume and beauty, mainly driven by the Hermesence range that I've just mentioned. It's a bit tougher or a different picture in the external network. because a lot of the other players try to reduce their stock, so we are being hit by that desire from the external distributors to reduce their stock. But our strategy remains unchanged. We're going to optimize our own distribution network with dedicated spaces to perfume and beauty to better display our offering that is now much broader and will get even broader with skincare and such like in 2028. The next question is from Thomas Chauvet from Citi. Over to you. Good morning, Eric and Alexandra. Two questions. First of all, for prices in 2027, what is the price increase that you're expecting on the basis of the inflation of prices for materials, etc.? ? I seem to remember that you talked about plus 6% or even more than that at the end of June, so please clarify on that. Secondly, on the scope effect, you gave us an estimate of 1 or 1.5%. That was for the impact on the store network. But with Beijing, Geneva, Bond Street, what kind of impact would that be in 2027? So how will these stores be impacted, especially Bond Street in 2027? Thank you, Thomas. So first of all, for our pricing policy, we're going to apply the same rule as usual. We are going to try and clarify our own costs and to pass that on, at least for the Eurozone. So factoring the increasing costs of materials and payroll. So that's the first thing. And then secondly, we have to take into account the currency impact, which, as we mentioned, will be negative because of the depreciation of the yen, because we are hedging gradually, but we haven't hedged for 2027 yet. or at least not entirely. But I mentioned that the price increases will probably be slightly under 2026 or 2027, but none of this is finalized for the moment. So we'll decide on price increases in a month or two. Regarding the scope effect, we often have somewhere between 1 or 1.5% impact, but next year we should not see any impact. and greater scope effect because there are no big openings like we have this year, Bond Street and Geneva. The next question is from Edouard Aubin from Morgan Stanley. Good morning, Eric and Alexandra. Thank you for giving me the floor. On ready-to-wear, I see that there's a drop in Q3. That's the first time in a decade, if I recall correctly. Eric, could you tell us why there is this slight drop, and what are you going to do to increase the desirability of ready-to-wear going forward? Question number two now. You have a growth gap of 13% between leather goods and ready-to-wear. Are there regions where there are stronger discrepancies? Is there anything that you can say on that? And yeah, that's it for my two questions. Thank you. Now, regarding ready-to-wear and accessories, it's worth saying that Q3 does not reflect the positive underlying trend. There is a slowdown in Q3, mainly because of China. And excluding China, ready-to-wear, accessories, and also jewelry and other divisions are growing. Volume-related divisions have suffered a bit more, once again because of the slowdown in Greater China. And ready-to-wear, if you consolidate it, is growing for Q3. So all the regions are growing for ready-to-wear, except China, that is faced by a number of difficulties that I outlined earlier. The positive thing about ready-to-wear is that our sell-through rate of our collections remains very high, so much so that a lot of stores had to reorder, replenish their stock, because both collections sold really well. The latest collection, Spring Summer, which was presented at the Gare des Bleuquins, was Very successfully launched. There were a lot of very positive articles on the lightness, the excellency of this collection with unique know-how. And here again, it's a bit like for jewellery. You need to bear in mind the fact that we had very strong growth across the last four years. For ready-to-wear, we're looking at plus 80% across four years. So the comparison basis is really very high. And now when we look ahead, there are two main projects that are important milestones for us. First of all, there's the launch of the first men's collection by Grace Wells. Bonner, and then the new collection Couture, which will have a kind of halo effect for the whole ready-to-wear division, probably women's ready-to-wear to even a larger extent. And then shoes are affected by, of course, China and also the slowdown in the Middle East. But here we also have projects to have a value strategy. So for men's ready-to-wear and for shoes and for women's shoes, we are going to be developing items such as the jumping, so boots, essentially, and putting new models out there. But you'll see that soon. The next question... Oh, sorry, there was another question. on the gap for leather goods. Leather goods is making progress across all the regions. And all the leather goods that we produce is being sold. So desirability is very strong for Kelly, Kelly Birkin and other bags across all regions. And the next question is from David Damaya from CIC CIB. Hello Alexandra and Eric, thank you for taking my question. Thank you very much. And then second question on exchange rates. My understanding is that you haven't completely completed your hedging strategy. Could you tell us what you expect from a currency fluctuation point of view for the end of 2026 and for 2027? Right, okay, so in October, no change in trends, and that's true for all regions, including China. China is following the trend that we've seen so far for August and September, so no drop there. A slowdown that has impacted mainly Q3. We'll see to which extent that will impact Q4, but right now we don't see any change in trends. Regarding the hedging effect, currency hedging effect, We're waiting for the budgets of our different entities. For this year, we're at about €310 million of negative impact, but we're 100% covered for that. and that has an impact on the operational margin and for next year I can't really give you more information because we still have one amount to hedge and you might also have noticed that the dollar is a bit stronger now so the dollar should be may be more favorable, but we haven't completed the hedging yet, so I remain conservative for the moment. We're now going to move on to questions in English.

The next question comes from Chiara Battistini with JP Morgan. Please go ahead.

Hello, good morning. Thank you for taking my questions. I have just a couple left. One is on the operating expenses in the current environment, given the uncertainty and the ongoing pressure in Asia. How should we be thinking about the evolution of operating expenses into H2, but also starting to budget for next year and margins implications from sustained volatility? on top line. And the second question on maybe touching on the Middle East, what are the latest trends that you've been seeing there towards the end of the quarter and into Q4? Thank you.