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Hermès Sees Growth Slowing in Second Half

Luxury firm Hermès has forecast a sales bump of at least 5 percent for the full year.

PARIS — Sales at Hermès International rose even faster in April and May than the 18.5 percent increase registered in the first quarter, but these growth levels should drop off in the second half, chief executive officer Patrick Thomas said Monday.

“Sales continue to progress at an extremely good rate for the time being, in fact at a rhythm superior even to the first quarter, especially in watches,” Thomas told the company’s annual meeting here.

“But it is important to put this into perspective and to always make the effort to look at the evolution of sales in the long term,” he added. “This very strong growth in the first half of the year must not prompt us to overestimate our forecasts for the end of the year.”

Hermès published data for the first quarter last month, warning at the time that it would encounter more challenging comparisons in the second half. It has forecast a sales bump of at least 5 percent for the full year.

Even Japan, the company’s number-one market, has seen a rebound, Thomas noted. “I am very confident in the fact that we will be able to continue developing very selectively in Japan without increasing the number of our points of sale, but probably by increasing the size of our points of sale and our product assortment in these stores,” he said.

Thomas said the recent weakness of the euro was good news for the luxury brand. A weak euro makes European exports more accessible in foreign currency terms.

“We were suffering from an excessively strong euro up until now,” the executive said. “I think the euro today is at a fairly good level as far as we are concerned.”

He added the level of the euro, which fell below $1.19 on Monday for the first time in four years, should not impact Hermès’ sales in 2010 and would only become an issue if the slump were protracted.

The company ended 2009 with a net cash position of 508 million euros, or $708 million, but ruled out any acquisitions in the near term. “I’m not saying it will never happen, but for now the most important message is that organic growth is largely sufficient to guarantee the development of our house,” Thomas said.

In response to a question from a shareholder, Hermès artistic director Pierre-Alexis Dumas defended the company’s recent decision to part with Jean Paul Gaultier, who has been designing women’s wear for the house since 2003, and hire Christophe Lemaire, creative director of Lacoste for the last 10 years.

“First of all, this was a shared decision,” Dumas said. “Obviously, the departure of a designer is always a challenge. It implies a long-term strategy elaborated together with the whole women’s ready-to-wear team and, in accordance with our criteria, we have chosen Christophe Lemaire, for whom we have very high hopes.”

Thomas also confirmed that a former employee had recently been sentenced by a French court for his involvement in a ring trading counterfeit Hermès handbags in Asia.

“It is a former employee of the house who was caught making counterfeits in his spare time and who has been sentenced very firmly by the court,” he said.

A spokeswoman for Hermès said the court had tried six people for counterfeiting and exporting products, adding the sentences ranged from jail time to heavy fines. The court has issued an arrest warrant against two Japanese nationals.

The spokeswoman declined to provide further details, saying she could not discuss the case further because it had gone into appeal. The court could not provide any information about the ruling, delivered in March.

In other business, shareholders overwhelmingly approved the nomination of Florence Woerth, who works in finance and is the wife of France’s labor minister Eric Woerth, to the board of the company.