Luxury Goods

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Hermès - >>> Another iconic European luxury brand, Hermès, is a no-brainer buy right now. Just like Ferrari, Hermès doesn't need to worry about inflation and other macro headwinds because its core customers aren't much bothered by economic downturns. It can also easily afford to charge higher prices to offset its elevated supply chain costs.

https://www.fool.com/investing/2023/04/18/why-ferrari-hermes-and-coca-cola-are-no-brainer-bu/


Hermès differentiates itself from other top-tier luxury companies like LVMH (LVMUY) with two tactics.

First, it produces most of its products in France through a tight network of artisan workshops instead of outsourcing all of its production to overseas factories -- as LVMH does with most of its leading brands. That focus, which results in some items being crafted from start to finish by a single artisan, enables Hermès to sell its products at sky-high prices and gross margins.

Second, Hermès doesn't own a massive portfolio of secondary brands like LVMH does. It spends all of its cash cultivating the growth of its namesake brand, which prevents it from overdiversifying and diluting brand appeal.

This is a simple formula that generates consistent growth. Between 2017 and 2022, Hermès' revenue grew at a CAGR of 16%, its recurring operating margin expanded from 34.6% to 40.5%, and its net profit increased at a CAGR of 22%.

Analysts expect its revenue and net profit to grow 16% and 14%, respectively, in 2023. Its stock might seem pricey at 54 times this year's earnings, but it arguably deserves that high valuation.

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