Here’s why the Hermes share price is soaring and beating rivals

The Hermes share price has done well this year, outperforming other top players in the luxury goods industry. It rose to a high of €2,300, its highest level since May 21st and 21% above the lowest point in September. 

Hermes stock has risen by 24% this year, while LVMH, Kering, Richemont, Burberry, and other luxury brand companies have retreated. So, why is Hermes doing better than other companies?

Hermes business is doing well

The luxury goods industry is doing well, helped by the strong demand of its products across key geographical regions.

The most recent results showed that the company’s revenue rose to €11.2 billion in the first nine months of the year, up by 14% from the same period a year ago. 

Its third-quarter revenue rose by 11% to €3.7 billion. Its Asian business continued to boom, helped by key countries like South Korea, Singapore, and Thailand. However, the Asian segment was impacted by China, where consumer spending has slowed recently. There have been reports of many luxury malls in Hong Kong and other leading cities having low traffic. 

Japan’s sales surged by 23%, partly because of the soaring stock market, which benefited wealthy individuals. The company also saw strong sales in places like Europe andthe Americas. 

Most of its growth is being driven by its leather business, whose sales jumped by 17%. The company continued to boost its capacity by opening a new workshop in Riom. Other parts of its business like the ready-to-wear and accessories, perfume and beauty, and silk and textiles continued to do well.

Hermes has done better than its competitors for a few reasons. First, it caters to the ultra-wealthy who are willing to spend tens of thousands of dollars for a handbag. Some of these shoppers even spend over $300,000 for a bag that they spent months or even years waiting for. 

Read more: Here’s why the Hermes stock is beating LVMH and Kering

Further, the company is considering moving to the popular haute couture, which is the most exclusive service, where products are custom-made. These products tend to have higher margins since the products costs thousands of dollars.

Additionally, Hermes has also mastered the art of selling, narrative, and production. While other companies are chasing production, most of its products are handmade in its workshops in France. The company, which does not have a marketing department, is known for engineering shortages, which makes its products more valuable. 

Still, all this has led to a big premium for the company, which now has a market cap of over $250 billion. Its total sales stood at over $14 billion in the last financial year, while its net income was over $4.4 billion.

In contrast, LVMH made over $95 billion in 2023 and a net income of over $17 billion. LVMH has a market cap of over $331 billion, which is about $81 billion bigger than Hermes. It has a price-to-earnings ratio of 22, much smaller than Hermes’ 54.

Hermes share price analysis

Hermes stock chart | Source: TradingView

The daily chart shows that the Hermes stock price has been in a strong uptrend in the past few weeks. It has moved above the crucial resistance level at €2,277, its highest swing on September 27.

The stock has moved above the 50-day and 100-day Exponential Moving Averages (EMA). Also, the MACD indicator has moved above the zero line. The Relative Strength Index (RSI) has continued rising and is nearing the overbought point at 70. It has also formed an inverse head and shoulders pattern.

Therefore, the stock will continue rising as bulls target the next key resistance point at €2,415, its highest point in March this year. A move above that level will point to more gains, with the next point to watch being at €2,500.

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