Hermès Sales Rise 16% in Third Quarter

Luxury firm raises full-year guidance, but warns of possible production bottlenecks.

PARIS — Sales at Hermès International rose 16 percent in the third quarter, prompting the maker of Kelly bags and silk scarves to raise its targets for sales growth and operating margin for 2011 – provided it can keep up with demand.

The luxury firm now expects to post a sales increase of 15 percent to 16 percent at constant exchange rates, versus a previous forecast of a 12 percent to 14 percent rise. “Meeting this target will be highly contingent on the business sectors’ ability to meet stepped-up demand ahead of the year-end holiday season,” it said in a statement.

Hermès chief executive officer Patrick Thomas had previously cautioned that robust demand for luxury was likely to outstrip its inventories and production capacity in the second half.

The company added that it now expects current operating margin to slightly exceed the record level achieved in 2010, versus an earlier forecast that it would remain broadly unchanged.

Revenues at Hermès totaled 683.2 million euros, or $967.2 million, in the three months ended Sept. 30, versus 590.1 million euros, or $761.2 million, in the year-ago period. During the first nine months of the year, sales totaled 1.99 billion euros, or $2.79 billion, up 19.5 percent from 1.66 billion euros, or $2.19 billion, during the same period last year. Dollar figures are converted from euros at average exchange rates for the periods to which they refer.

Hermès posted a healthy performance in its own stores — up 15.5 percent in the third quarter — with most key divisions showing strong increases. Sales of ready-to-wear and fashion accessories were up 28.9 percent, while silk and textiles registered a 21 percent increase.

Leather goods and saddlery rose by a more modest 8.1 percent in the third quarter, but Hermès reported strong demand for new models including the Lindy and Jypsière, alongside the house’s classic Kelly and Birkin bags. Wholesale revenues were up 16 percent in the third quarter. Watches led the way, with a 22.4 percent increase, perfumes were up 11.2 percent and tableware rose 15 percent.

In regional terms, non-Japan Asia registered the best performance in the quarter, up 28.9 percent, closely followed by Europe — excluding France — which posted a 21.3 percent rise. In Japan, overall sales rose 4.3 percent in the third quarter.