By  on November 9, 2007

PARIS — In another sign of luxury's vigor, sales at Hermès International rose 12.3 percent in the third quarter to 394.7 million euros, or $542.3 million, from 351.4 million euros, or $446.3 million, a year ago.

On a like-for-like basis, and stripping out the impact of currency, the increase stood at 13.6 percent. The results reflect a pickup in Japan, despite a sluggish environment there, and robust demand for silk scarves, ready-to-wear and fragrances, particularly the new Kelly Calèche scent.

"We are in a positive mood," said Patrick Thomas, chief executive officer of Hermès, highlighting a 16.7 percent spike in third-quarter sales in the company's own boutiques. "It's a significant upturn....For October, the trend is good."

The company cited particular strength in Asia — excluding Japan — where sales leaped 27 percent in the third quarter despite a slowdown in tourism there. Hermès has stepped up its presence in the region, recently adding boutiques in Hangzhou and Chengdu in China.

In the quarter, perfume sales rose 44 percent; tableware, 21.3 percent; silk and textiles, 18.9 percent, and rtw and fashion accessories, 10.5 percent. Sales of leather goods inched up 1.5 percent, while watches fell 7.6 percent.

Thomas noted a 15 percent increase in leather bags was dented by weak sales of canvas bags in Asian duty free channels, and he blamed weakness in Japan for the decline in watch sales.

Hermès' strong numbers, ahead of expectations, follow double-digit gains reported recently by Gucci Group and LVMH Moët Hennessy Louis Vuitton.

In a research note, HSBC analysts Antoine Belge and Erwan Rambourg said Hermès' robust figures and "cautiously optimistic" outlook "demonstrate that the luxury consumer remains resilient."

They cautioned, however, that a 9 percent slide in the value of the U.S. dollar since the summer is creating serious headwinds for European luxury players, and a "gradual slowdown" is inevitable after three exceptional years.

The negative currency trend slashed 54 million euros, or $74.2 million, off Hermès' sales for the nine months ended Sept. 30. In the period, revenues totaled 1.12 billion euros, or $1.52 billion, from 1.05 billion euros, or $1.33 billion, an increase of 6.1 percent. All currency conversions were made at average exchange rates for the respective periods.By region, nine-month sales rose 16 percent in Europe, 11 percent each in the U.S. and France, 3 percent in Japan and 13 percent in Asia. Hermès upped its full-year sales growth targets to 8.5 percent to 9.5 percent at constant exchange, with operating income projected to be flat due to unfavorable exchange rates.

Last month, Hermès unveiled an expanded Paris flagship on the Rue du Faubourg Saint-Honoré, now the largest in the world. Thomas said the unit is "booming." In the last quarter, Hermés plans to open or renovate nine other branches, including a renovated location in Lyon, France, and new boutiques in Moscow and Crans Montana, Switzerland.

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