WWD.com/beauty-industry-news/financial/hermes-sales-rise-121-1642187/
government-trade
government-trade

Hermes Sales Rise 12.1%

Hermes International on Tuesday reported better-than-expected second-quarter sales, bolstered by robust activity in America and Asia, excluding Japan

PARIS — Hermès International on Tuesday reported better-than-expected second-quarter sales, bolstered by robust activity in America and Asia, excluding Japan.

This story first appeared in the July 23, 2008 issue of WWD.  Subscribe Today.

The French luxury firm said sales in the three months through June 30 advanced 12.1 percent to 398.1 million euros, or $622.3 million at average exchange, despite continued tough business in the important Japanese market. This compares with revenues of 355 million euros, or $478.6 million, in the corresponding period a year earlier.

The results beat most analysts’ expectations and signaled health among Europe’s key luxury players despite the tough economic environment.

Mirelle Maury, Hermès’ managing director of finance and administration, confirmed the company’s full-year guidance of sales growth of at least 10 percent at constant exchange rates. She added that Hermès expected exchange rates to weigh on sales by about 5 percent and as much as 10 percent on full-year results.

Analysts applauded Hermès’ strong performance and said it added evidence to the wellbeing of Europe’s key players. However, shares in Hermès dropped 6.9 percent to 93.78 euros, or $144.31 at current exchange, in trading on the Paris Bourse despite its solid numbers.

“Hermès, like Burberry and Richemont, continues to show a remarkable resilience to the economic downturn,” said HSBC analyst Antoine Belge in a note to investors. Belge nonetheless added that “a slowdown is bound to happen in the second half of 2008” for the luxury sector.

Richemont earlier this month said sales gained 13 percent in its first quarter, while Burberry said its sales in the quarter grew 26 percent.

Hermès said sales before the impact of currency exchange grew 17.4 percent, led by double-digit growth in core businesses of silk scarves, leather goods and ready-to-wear.

“The second quarter was excellent,” said Maury. “All geographic zones except Japan were strong. Sales at the Wall Street store [in New York] were great.”

Maury said demand continued to outpace supply in certain leather goods and that the company planned to increase production in the second half.

Sales of fragrances gained 28 percent, while tableware grew 15 percent. Watch sales were a weak spot, falling 10 percent due to weak business in Japan.

By region, sales were strong everywhere except Japan, where sales dropped 0.4 percent. “We expect the second half to continue to be tough in Japan,” said Maury.

Japan is Hermès’ single largest market outside of France, where sales grew 15.5 percent, lifted by the expansion of the luxury group’s Paris flagship on the Rue du Faubourg Saint-Honoré.

Sales elsewhere in Europe grew 29.7 percent and sales in Asia outside of Japan grew 8.4 percent. Before the impact of currency exchange rates, sales in Asia grew 22.7 percent. In America, revenues advanced 10 percent, with growth of 25.5 percent before the impact of currency exchange.

Maury said Hermès planned to open 25 stores this year. Notable openings planned for the second half include two stores in Mainland China, a shop in Hong Kong and a boutique in San Diego.