PARIS — The skies continue to appear cloudless for the high-flying luxury sector.
Hermès International on Tuesday edged up its sales forecasts for the year after reporting profits in the first half bounded 55.2 percent to 194.6 million euros, or $258.9 million, versus 125.4 million euros, or $166.8 million, a year ago.
The French luxury goods firm is projecting sales growth at constant exchange rates of around 12 percent for the full year, versus an earlier target of about 10 to 12 percent.
HSBC is bullish on luxury, too, and on Tuesday upped its 2010 global growth forecast for the sector to 11 percent from 10 percent. Shrugging off concerns about a high basis of comparison going forward, the investment firm said the luxury sector should post organic growth of 7.5 percent in 2011 and outperform general retail in Europe and the U.S., with Asia roaring ahead and Japan harboring the potential to surprise.
“Luxury companies are still spending cautiously, the China theme is positive for margins and the euro weakness is a poster,” HSBC analysts Antoine Belge, Erwan Rambourg and Sophie Dargnies wrote in a report titled “Not too late to buy.”
HSBC has overweight ratings on most of the stocks in its universe, including LVMH Moët Hennessy Louis Vuitton, Compagnie Financière Richemont, PPR, Tiffany, Coach and Luxottica. It upgraded Bulgari, but downgraded Burberry and Hermès, both on valuation.
Shares in Hermès have risen about 52 percent year-to-date, and HSBC warns “there’s a limit to how much investors should be willing to cash out for such a quality asset.”
That said, however, “we believe Hermès sales trends will not underperform the industry. The current move away from conspicuous consumption should benefit Hermès thanks to its classical positioning.”
In a research note, Evolution Securities analyst Dennis Weber derived the same opinion from Hermès’ better-than-expected results: profit recovery for the sector continues to accelerate.
“Business continues to be good,” a sanguine Hermès chief executive officer Patrick Thomas told WWD, singling out the company’s robust performance in France and its historical base in Europe, up 17 percent in the half.
“It’s growing at a spectacular pace, partly because of the local customer and partly because of Asian tourists,” he said, noting that a rising yen and weak yuan are fueling spending patterns in the brand’s favor.
Hermès also continues to register robust growth in Asia and the United States, the latter up 26 percent at the end of June and characterized as a “stronghold” by Thomas. Hermès continues to raise its profile in key markets in the U.S., including New York, where earlier this year it opened a men’s only store on Madison Avenue and recently upgraded the leather goods department in its women’s flagship (see sidebar).
During the first half, 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 in 2009, as reported. 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.
Operating profits jumped 52.4 percent to 304.5 million euros, or $405.1 million, versus 199.8 million euros, or $265.8 million, in the first six months of 2009.
Aided by currency tailwinds, Hermès said it would improve the current operating margin by at least 100 basis points in 2010.
On Sept. 16, Hermès plans to unveil in Shanghai the first location for its new Chinese brand Shang Xia, but Thomas noted the project would not have any financial impact in fiscal 2010. He noted the firm would open “plenty more” locations, but declined to detail its expansion plan.
Hermès also plans to open or renovate 20 boutiques this year, including a Left Bank flagship here on Rue de Sevres. The unit would have a large space dedicated to furniture and other products for the home, Thomas said.
Long of the opinion that the 2009 financial crisis would have a lingering impact, Thomas cautioned that economic factors, such as topsy-turvy consumer sentiment in the U.S., could impact the company’s growth rates in the second half. Still, he allowed that Hermès has lately been proving itself an exception to its own rule.
“Hermès used to be strong in crisis and grow more slowly during boom times. Now we are growing fast in both periods,” Thomas said.
EXCLUSIVE: @tomford is opening its first-ever beauty store. The boutique, which opens November 20 in London’s Covent Gardens, was designed with the over-the-top glam Ford is known for. Read the full story on WWD.com, link in bio. #wwdbeauty #wwdnews (📷: Simon Wagner) #TomFordBeauty
New York-based DJ @harleyvnewton threw a party to celebrate the holiday collection of her dress and pajama line @hvn at the Ladurée Beverly Hills. It Girls @katebosworth, @rashidajones and more joined in on the fun, which included cocktails, croque monsieur sandwiches and a photo booth. #wwdfashion (📷: Owen Kolasinski/BFA.com)
For the holidays, @Burberry partnered with 20-year-old artist @blondeymccoy on a series of three outdoor murals in downtown Manhattan. The murals are McCoy’s interpretation of a Christmas eve party, the idea of charity and the spirit of family. His third mural, pictured here, is the most personal. The image depicts McCoy’s grandparents and father in London’s Trafalgar Square in the Seventies. “My work often features lots of sentimental objects.” #wwdeye
For spring 2018, designers applied bold colors and cartoonish motifs on everything from sneakers and belts to key chains. See all the top men’s accessories trends on WWD.com. #wwdtrends (📷: George Chinsee; Prop Styling by @rnasti; Market Editor: @luiscampuzano)
The @dior-sponsored @guggenheim international gala pre-party has a history of drawing cool-girl musical acts to serenade the crowd –– and last night was no exception. @haimtheband performed songs both new and old, and lured a star-studded audience with the likes of Rebecca Hall, Kate Mara, Mamoudou Athie and more. #wwdeye (📷: @lexieblacklock)
In a partnership between the @metopera and the @englishnationalopera, “Marnie” was born. The opera, with costumes sponsored by @mrporterlive, is an adaptation of the 1961 thriller by Winston Graham. Arianne Phillips, who created the costumes, is no rookie: She’s styled Madonna for her tours and created costumes for a myriad of films in the past. Read WWD’s interview with Phillips, where she talks about her inspiration for the opera’s costumes on WWD.com #wwdfashion
@barneysnyc took a different approach to their holiday windows this year. Instead of Christmas decor, Barneys tapped @thehaasbrothers to tell a story of positivity, gratitude and inclusivity via heartwarming silliness and humor. “It’s about kids and it’s about coming together and being family and loving each other,” said Simon Haas. #wwdfashion (📷: @joshuascottphoto)
Beauty influencer @kandeejohnson makes her foray into hair care with a collaboration with @ogx_beauty — making it the first time that OGX has teamed up for a product creation. The collab includes shampoos and conditioners in three scents. At 39 and a mom, Johnson is a different profile than the emerging social media stars, but is considered one of the pioneers of the digital beauty influencer world. Read WWD’s interview with her on wwd.com, including the strangest beauty product she’s ever tried #wwdbeauty