PARIS — Sales at Hermès International jumped 27 percent in the second quarter, propelled by strong demand for its iconic leather bags, silk scarves and watches.
“There is a rebound effect at play in the growth rates, which we are also seeing in the psychology of customers,” said Patrick Thomas, chief executive officer of the French luxury firm. “We benefit particularly from this state of mind, as during periods of instability and anxiety, customers flee toward safe-haven values.”
Turnover at Hermès totaled 567.0 million euros, or $723.5 million, in the three months ended June 30, versus 446.6 million euros, or $608.3 million, in the year-ago period.
During the first half of the year, sales totaled 1.07 billion euros, or $1.43 billion, up 22.8 percent from 874.9 million euros, or $1.17 billion, during the same period last year. Dollar figures are converted from euros at average exchange rates for the periods to which they refer.
In light of the better-than-expected second-quarter data, Hermès raised its sales growth target to between 10 and 12 percent at constant exchange rates. The company had previously expected sales growth to top 5 percent.
Thomas said the first-half figures benefited from favorable comparisons with 2009, meaning sales growth rates would drop off in the second half. “Without being pessimistic at all or saying things will grind to a halt, I think we must be cautious in the forecasts for the second half,” he said.
Hermès posted a solid performance in its own stores — up 27.7 percent — with all key divisions showing strong increases. Sales of leather goods were up 31.5 percent, while ready-to-wear and fashion accessories posted a 25.7 percent rise. Silk and textiles registered a 24.3 percent increase.
Wholesale revenues were up 19.8 percent in the second quarter, with most of the increase due to watches, which saw sales rise 35.9 percent as consumers regained their appetite for luxury timepieces. Perfume sales were up 16.9 percent, though the increase was down from the 38.1 percent jump registered in the first quarter thanks to the launch of the scent Voyage d’Hermès.
Thomas said the strongest categories overall were watches, leather goods, textiles and fashion accessories.
In regional terms, non-Japan Asia registered the best performance in the quarter, up 57.1 percent, with the Americas up 35.5 percent and Europe — excluding France — up 26.3 percent. In Japan, overall sales rose 10 percent in the second quarter. Thomas noted that sales in the firm’s own stores in Japan were up 7 percent in the first half.
He predicted that for 2010 as a whole, current operating margin would increase to “at least” 25.2 percent versus 24.2 percent in 2009, and could even reach the 2008 level of 25.5 percent.
In a research note, HSBC luxury analysts said the company’s full-year sales guidance was “still a bit conservative,” as the basis for comparison would remain relatively favorable in the third quarter.
“Thanks to its classical positioning, Hermès should continue to benefit from the current move away from conspicuous consumption. For Hermès, the limiting factor remains production capacity,” they added.
Thomas confirmed the departure of Véronique Gautier as president of Jean Paul Gaultier, of which Hermès owns 45 percent.
“This changes nothing — absolutely, strictly nothing — in the excellent relations between the house of Jean Paul Gaultier and us,” he said.
“We own a minority stake in Gaultier, and we are determined to leave the leadership of this house to its president, who is Jean Paul Gaultier himself — he is the boss. Secondly, we are there to help the house should it be necessary, but I hope it won’t be necessary,” he added.
Thomas also reiterated his support for Florence Woerth, the wife of France’s labor minister Eric Woerth, who has been at the center of media speculation since she was voted to the board of Hermès in June.
Florence Woerth oversees part of the fortune of L’Oréal heir Liliane Bettencourt, who is the subject of an ongoing legal battle for her billions that has dominated headlines for weeks.
“It’s much ado about nothing,” said Thomas. “All of this does not affect in any way the choice made by the directors of the house.”
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