PARIS (Reuters – French luxury company Hermes announced that its fourth quarter sales grew 11%, slightly less than market expectations. The group’s self-imposed production cap meant it could not meet demand for handbags.

The company also reported that sales at its leather goods and saddlery segment, which includes the famous Birkin handbags and Kelly handbags, dropped by 5.4%.

Hermes has a tradition of limiting volume growth in leather goods production to 7-8% per year. They prefer long wait lists for their prized handbags over accelerating production.

Hermes reported that overall sales increased to 2.38 billion euro ($2.71 million) during the three-month period to December. The growth was driven by U.S. customers. This compares to a consensus estimate for revenue of 2.53 billion euros, and 12% growth at constant currency rates as cited by UBS.

Hermes’ key holiday season sales growth slowed from its stellar pace in previous quarters, which was in stark contrast to the rapid acceleration in luxury sectors.

The group managed to weather the coronavirus pandemic much better than its competitors. Its 2021 sales increased by 42% compared with a year ago and 33% compared to their levels before the crisis.

Axel Dumas, executive chairman, stated to reporters that Hermes has increased prices globally by an average 3.5% this year. This is higher than the 1.5% increase rate, which is mainly due to rising production costs.

($1 = 0.8796 euros)