What's going on?

On Friday, Herm�s � maker of the iconic Birkin bag � said its sales for the second quarter rose by 7% to a handbag-stuffing $1.7 billion. But the shares, which had already climbed 20% this year, simply shrugged.

What does this mean?

Chinese shoppers make up about a third of all luxury goods bought globally, so it�s impossible to talk about one of the industry�s darlings without mentioning China. Despite recent sharp falls in the country�s stock market, thanks to slowing economic growth � and real estate prices that aren�t increasing as quickly as they used to, making people in China feel less wealthy � it appears the Chinese are still choosing to treat themselves with the odd belt or bracelet.

Why should I care?

For markets: Heaven for leather.

Excluding the effect of currency movements, sales actually rose by 12%, topping the 10% increase forecast by analysts (tweet this). Herm�s customers can wait literally years for a Birkin (unless you�re Lucy Liu), meaning the company is more insulated than other luxury firms from any sudden reduction in demand (since it�s got so much of its own pent up). Herm�s shares have been on a tear recently, and have become quite expensive according to a common valuation measure: the stock changes hands for over 40 times the amount of profit the company generates per share.

The bigger picture: Luxury problems.

While it might be easy to assume luxury companies can charge customers whatever they want for access to their fancy clobber, Herm�s is actually facing a similar issue to more modestly priced consumer companies � raising prices. After China cut tariffs on imports in July, Herm�s could�ve chosen to keep prices constant and make more profit. Instead it chose to trim its prices by 4%. Investors will hope to have a clearer view of whether Herm�s was simply giving back to its customers or something more sinister is afoot when LVMH (owner of the Louis Vuitton and Givenchy brands) and Kering (home of Gucci) report second-quarter earnings.