Showstopper

Image source: evolucian - Shutterstock

What's going on?

Herms posted weaker-than-expected quarterly results on Friday, probably because no ones made a biopic about its salacious history yet.

What does this mean?

When a $9,000 Birkin bag takes an average of 15 hours to make, there are only so many that Herms can churn out on any given day. Thats made keeping up with demand tricky, which is why sales from the luxury giants leather goods and saddlery division which makes up nearly half its total revenue, because rich people need saddles fell 5% compared to the same time in 2020 (excluding the effect of currency swings).

So to make sure this doesnt happen again, Herms said its planning to open new production sites by 2024, in hopes of manufacturing around 7% more leather goods every year. But even that was a downgrade from a previous target, and unimpressed investors sent the luxury players stock down 8%.

Why should I care?

The bigger picture: At least Kerings fine.
Hermss misfortune doesnt speak to the rest of the industry, with Kerings share price climbing 8% following its own earnings update late last week. The company said that the release of a new Gucci collection and the hit movie House of Gucci brought more attention to its flagship brand last quarter, helping the segments revenue rise by a much better-than-expected 32% (tweet this). And since Gucci makes up nearly 60% of Kerings total revenue, that helped overall revenue beat expectations too. As for costs, there was only one: inflicting Jared Letos Italian accent on the world.

Zooming out: Hold my digital bag.
There could be another way for Herms to generate some extra income: Morgan Stanley thinks luxury-branded NFTs could become a $56 billion market by 2030, as well as make up as much as 7% of luxury companies revenue by then. And since digital bags cost a lot less than real ones to produce, theyd give Hermss profit a much bigger boost too.

Originally posted as part of the Finimize daily email.

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