PARIS — Hermès International said Tuesday it was maintaining its long-term guidance for 10 percent annual growth at constant exchange rates, even though sharp currency fluctuations wiped 40 million euros, or $54.8 million, from its books in the first quarter.
The maker of Kelly bags and silk scarves reported sales rose 10.1 percent in the three months ended March 31, boosted by continued strong growth in Asia and the Americas. When stripping out the impact of exchange-rate variations, this represented an increase of 14.7 percent, beating market expectations.
Patrick Albaladejo, deputy managing director in charge of strategy and image at Hermès, said the currency impact was mainly due to the continued weakness of the Japanese yen. Though Hermès chief executive officer Axel Dumas warned analysts last month to expect a drop in profit in 2014 in light of the strong currency headwinds, Albaladejo said it was difficult to forecast their full impact.
“When you see the violence and the suddenness of the yen’s movements, I don’t see who could really make that prediction at this stage,” he said. “Macroeconomic currency movements are a factor that is beyond our control and that we have to put up with. There is nothing we can do about that, so what you have to look at is: What is the underlying vitality of the business? And today, it is very good.”
At constant exchange rates, sales in Asia-Pacific, excluding Japan, rose 17.7 percent during the period. Sales in Mainland China were up around 16 percent, according to Albaladejo, while turnover in Japan jumped 21.7 percent as consumers brought forward big-ticket purchases ahead of a rise in sales tax on April 1.
The Americas registered 17.9 percent sales growth, while Europe advanced 9.5 percent.
Albaladejo was cautious about projecting growth for the rest of the year.
“We know there will be a correction in Japan,” he said. “It is very difficult to quantify. So we are very attentive. We are tracking events, but we have no other target than our stated objective of average growth of 10 percent. We have no visibility beyond that.”
Nonetheless, Hermès remains confident about its long-term prospects in Japan, which accounted for 12 percent of total sales in the first quarter. “We have never had a negative vision of Japan, even when times were tougher. We never stopped investing. We remain confident in the potential of this market,” he said.
The French luxury firm also sees strong growth potential in the U.S., where it has been renovating and enlarging stores such as its flagship in Beverly Hills. “The United States of course is a mature luxury market…but one that has the same potential for Hermès as an emerging market,” he noted.
Albaladejo described Europe’s performance as “very encouraging” given the continued economic difficulties the region is facing. “It shows the vitality of demand for Hermès products, even in Europe,” he said. “For us, it is very important to keep a very solid base of local customers.”
Though Dumas recently estimated that Russian customers account for “well below 5 percent” of the firm’s business, Hermès is keeping close tabs on the political situation there, which this week prompted the U.S. and European Union to impose further sanctions over Russia’s actions in Ukraine.
“We are very attentive and we are of course following what is happening in Russia, in particular in our stores and regarding Russian customers outside Russia. To date, in other words, as of last week, we had not observed any measurable effect on our business of the events in Ukraine,” Albaladejo said.
The company’s overall revenues in the three months ended March 31 totaled 943.5 million euros, or $1.29 billion, up from 856.8 million euros, or $1.13 billion, during the same period a year earlier. All dollar rates are calculated at average exchange for the periods to which they refer.
Sales in its own stores were up 16.7 percent at constant exchange rates, fueled by strong demand for ready-to-wear and fashion accessories, which registered a 19.1 percent increase, and other Hermès sectors —spanning jewelry to tableware — which posted a 17.2 percent rise.
Sales of leather goods and saddlery, including the iconic Birkin bag, were up 15.5 percent in the quarter, while sales of perfumes rose by a more modest 5.9 percent. Meanwhile, watch revenues eased 0.1 percent amid continued weakness in the key Asian market.
“Hermès will continue its long-term strategy based on creativity, maintaining control over its know-how, expanding its distribution network, strengthening its production capacity and securing its supply sources,” the company stated, adding that its theme for 2014 was metamorphosis — “precious metals becoming objects in the skilled hands of craftsmen.”
The figures show Hermès again outperforming its industry peers. Kering last week reported revenues at constant exchange rates rose 4.1 percent in the first quarter, while LVMH Moët Hennessy Louis Vuitton posted a 6 percent increase.
Shares in Hermès closed up 0.2 percent at 255.15 euros, or $350.87, on the Paris Stock Exchange.
EXCLUSIVE: @tomford is opening its first-ever beauty store. The boutique, which opens November 20 in London’s Covent Gardens, was designed with the over-the-top glam Ford is known for. Read the full story on WWD.com, link in bio. #wwdbeauty #wwdnews (📷: Simon Wagner) #TomFordBeauty
New York-based DJ @harleyvnewton threw a party to celebrate the holiday collection of her dress and pajama line @hvn at the Ladurée Beverly Hills. It Girls @katebosworth, @rashidajones and more joined in on the fun, which included cocktails, croque monsieur sandwiches and a photo booth. #wwdfashion (📷: Owen Kolasinski/BFA.com)
For the holidays, @Burberry partnered with 20-year-old artist @blondeymccoy on a series of three outdoor murals in downtown Manhattan. The murals are McCoy’s interpretation of a Christmas eve party, the idea of charity and the spirit of family. His third mural, pictured here, is the most personal. The image depicts McCoy’s grandparents and father in London’s Trafalgar Square in the Seventies. “My work often features lots of sentimental objects.” #wwdeye
For spring 2018, designers applied bold colors and cartoonish motifs on everything from sneakers and belts to key chains. See all the top men’s accessories trends on WWD.com. #wwdtrends (📷: George Chinsee; Prop Styling by @rnasti; Market Editor: @luiscampuzano)
The @dior-sponsored @guggenheim international gala pre-party has a history of drawing cool-girl musical acts to serenade the crowd –– and last night was no exception. @haimtheband performed songs both new and old, and lured a star-studded audience with the likes of Rebecca Hall, Kate Mara, Mamoudou Athie and more. #wwdeye (📷: @lexieblacklock)
In a partnership between the @metopera and the @englishnationalopera, “Marnie” was born. The opera, with costumes sponsored by @mrporterlive, is an adaptation of the 1961 thriller by Winston Graham. Arianne Phillips, who created the costumes, is no rookie: She’s styled Madonna for her tours and created costumes for a myriad of films in the past. Read WWD’s interview with Phillips, where she talks about her inspiration for the opera’s costumes on WWD.com #wwdfashion
@barneysnyc took a different approach to their holiday windows this year. Instead of Christmas decor, Barneys tapped @thehaasbrothers to tell a story of positivity, gratitude and inclusivity via heartwarming silliness and humor. “It’s about kids and it’s about coming together and being family and loving each other,” said Simon Haas. #wwdfashion (📷: @joshuascottphoto)
Beauty influencer @kandeejohnson makes her foray into hair care with a collaboration with @ogx_beauty — making it the first time that OGX has teamed up for a product creation. The collab includes shampoos and conditioners in three scents. At 39 and a mom, Johnson is a different profile than the emerging social media stars, but is considered one of the pioneers of the digital beauty influencer world. Read WWD’s interview with her on wwd.com, including the strangest beauty product she’s ever tried #wwdbeauty