By  on February 11, 2005

PARIS — After a wobbly fall season, Hermès International resumed full gallop in the fourth quarter, with sales gaining 6.9 percent to 404.9 million euros, or $525.2 million.

Dollar figures are at average exchange.

At constant exchange rates, the increase stood at 11.2 percent, powered by robust demand for Birkin bags, silk scarves and neckties, Eau des Merveilles perfume and Hermès’ ready-to-wear collection, the first designed by Jean Paul Gaultier.

Late deliveries of rtw and fashion accessories had dented the luxury firm’s third-quarter performance, but the category posted an 8 percent jump in the fourth quarter at constant exchange. And, thanks to increased production capacity, the high-margin leather goods category also raced ahead 16.7 percent at constant exchange in the quarter.

“It was a very good year, and a very good Christmas in every region of the world,” said Mireille Maury, managing director of finance and administration at Hermès.

Notoriously cautious with sales and earnings guidance, Hermès declined to give any indication of sales in the first weeks of 2005. Maury would only say that “the trend remains favorable” and the company remains “optimistic.”

One of the last luxury goods players to report 2004 results — and facing perhaps the most difficult comps — Hermès bested analysts’ expectations and reinforced what many perceive as strong top-line growth prospects for the high-riding luxury sector.

For the full year, Hermès sales totaled 1.33 billion euros, or $1.65 billion, up 8.3 percent in reported terms or 11.9 percent excluding the impact of currency.

Hermès is slated to report full-year earnings here March 24.

In an interview, Maury highlighted particularly brisk business in the U.S., with fourth-quarter sales leaping 21.2 percent at constant exchange. Sales were up 21.8 percent in Asia-Pacific, 9.1 percent in Japan and 5.6 percent in Europe. France logged the weakest gain in the quarter: only 3.3 percent.

The silk category, not so lustrous in recent years, rebounded strongly in 2004, with sales up 9.5 percent for the year and 12.4 percent in the fourth quarter. Watches had a tougher go, with a slim 1.5 percent uptick.

After opening eight new stores — including three in China — and renovating or enlarging 15 locations in 2004, Hermès plans to slow its expansion slightly in 2005. Plans call for five new boutiques, including a 6,500-square-foot Maison Hermès building slated to bow in Seoul by yearend, plus renovations of 10 locations.“Hermès is still the brand with the strongest franchise in the industry,” Jacques-Franck Dossin, analyst at Goldman Sachs, said in a research note Thursday, praising “solid” results and a good margin mix.

However, Dossin noted the stock has little upside potential, as the family-controlled firm manages the company with long-term considerations in mind. He anticipates “limited growth in the next couple of years.”

Goldman Sachs took Hermès to task for the 32 percent stake it took in the camera firm Leica in 2000, since the investment offers no synergies and “meaningless financial contributions.” Indeed, the investment firm anticipates a 15 million euro, or $19.3 million, depreciation charge given Leica’s troubles in an age of digital photography.

Shares in Hermès rose 4.5 percent to close at 156.70 euros, or $201.68 at current exchange, on the Paris Bourse.

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