Targeting the customer base at the top of the pyramid has worked. Hermès’ revenue increased by 11.3% last quarter.

In a recent interview, we explored the compelling financial results released by Hermès, which indicate the luxury brand’s ability to navigate through the current downturn in the luxury market. On October 24, the company reported a remarkable quarterly revenue increase of 11.3%, reaching €3.7 billion (approximately $4 billion), aligning with analysts’ expectations. This surge in performance even led to a notable 3.4% spike in the stock price on that day.

While Kering, the parent company of Gucci, recently warned that their annual profits might be nearly halved, Hermès appears to have found a way to thrive in this challenging environment. The brand has effectively targeted the highest echelons of the wealthiest consumers, whose spending tends to remain resilient amid economic fluctuations. Moreover, Hermès possesses strong pricing power, evidenced by the lengthy waiting lists for its highly coveted Birkin bags.

The data is telling; Hermès shares have risen by 9% this year, contrasting sharply with LVMH’s nearly 15% decline and Kering’s drastic 40% drop. Notably, Hermès outperformed expectations in sales across Europe, Japan, and the Americas last quarter, although the Asia-Pacific region, including mainland China, saw only a modest 1% increase—below the anticipated 2.3%. Despite a slowdown in customer traffic in China, loyal clients continue to invest in high-ticket items such as jewelry and handbags, helping maintain Hermès’ stable performance.

In stark contrast, Kering’s last quarter results disappointed the market, prompting warnings of a potential profit drop nearing 50%, pushing it to the lowest point in eight years, largely due to weak luxury demand in the Asia-Pacific region affecting Gucci’s performance—mirroring a broader trend of struggles faced by other luxury brands. Kering reported a 16% revenue decline compared to the previous year, totaling €3.79 billion ($1.08 billion), exceeding analysts’ projections of 11%.

Gucci’s revenue alone plummeted by 25% year-on-year, exceeding market expectations of a 20.66% reduction, highlighting the ongoing challenges in revitalizing the flagship brand. Additionally, Saint Laurent’s revenue fell by 12%. Kering’s CFO, Jean-Marc Duplaix, acknowledged that the last quarter brought significant challenges, particularly with slowing demand in Japan and other Asia-Pacific regions, along with lackluster momentum in North America. Sales in China dipped by approximately 35%, while Japan saw a mere 3% growth—far below the previous quarter’s 27%. The price discrepancies of products in Japan and other countries have diminished their appeal to consumers.

Kering anticipates that ongoing uncertainties may exert further pressure on luxury demand, having observed a more pronounced decline in performance than expected last quarter. The adjusted forecast indicates that regular operating income could fall approximately 47% to around €2.5 billion ($2.7 billion), marking an eight-year low. Previously, the group estimated a 30% drop in regular operating income for the second half of the year.