PARIS — Hermès International blamed early spring-summer deliveries for a slowdown in second-quarter sales, but said it is on track to reach its top-line target of 7 to 7.5 percent growth for the full year.
Sales in the three months ended June 30 rose 4.5 percent, to 339 million euros, or $425.8 million, led by strong gains in perfumes, small leather goods and jewelry. At current exchange rates, the increase stood at 5.8 percent, versus 8.8 percent in the first quarter.
“We are totally in line with our expectations,” said Mireille Maury, managing director of finance and administration at Hermès, who highlighted a slight acceleration of sales in the second quarter in the company’s own retail network, which logged a 9 percent increase. She also noted the trend in Hermès’ boutiques remained positive in July.
For the half, sales grew 7.9 percent, to 700.5 million euros, or $879.8 million, a 7.3 percent rise at constant exchange. Currency conversions were made at average exchange rates for the period.
Still, analysts characterized the results as disappointing, given a buoyant luxury sector. LVMH Moët Hennessy Louis Vuitton, for example, on Tuesday reported a 10.5 percent bump in second-quarter sales and a 13 percent increase for the first half.
“Once again, Hermès’ wholesale business (30 percent of total sales …) proved very volatile,” Antoine Belge, an analyst at HSBC in Paris, wrote in a research note Wednesday. “In 2006, Hermès should once again underperform the industry.”
Silks, dependent on Japanese travel purchases and currently lagging due to the weakness of the yen, were among the disappointing categories, Belge noted.
Sales of silk fell 4.9 percent at constant exchange, to 34 million euros, or $42.7 million, which Maury also attributed to early deliveries, shifting sales to the first quarter rather than the second. She noted sales of silk items in Hermès’ own boutiques rose 7 percent in the second quarter.
A modest increase for bags and luggage, up 4.2 percent at constant exchange, to 137.2 million euros, or $172.3 million, reflected the discontinuation of a canvas line and belied strong sales of leather purses, which rose 20 percent in the quarter, Maury said. She noted the Birkin, Bolide and Paris-Bombay styles were among the bestsellers. Ready-to-wear sales were flat.
On the plus side, sales of perfumes climbed 34.1 percent at constant exchange to 23.7 million euros, or $29.8 million, thanks largely to the successful men’s fragrance Terre d’Hermès. Paced by strong demand for small leather goods and jewelry, sales for “other sectors” rose 24 percent at constant exchange to 34.6 million euros, or $43.4 million.
By region, Europe, excluding France, stood out with a 17.9 percent gain at constant exchange, to 64.4 million euros, or $80.9 million. Maury cited strong local demand across the zone and noted that Hermès continues to add boutiques in Europe. Amsterdam and Copenhagen locations bowed in the first half, and a Venice unit will be added in October.
“The trend is also very strong in the U.S.,” Maury noted, pointing to an 11.7 percent gain at constant exchange, to 51.3 million euros, or $64.4 million.
In a research note, Goldman Sachs analyst Jacques-Franck Dossin said the sharp acceleration of U.S. business for Hermès “should dispel some market worries of a U.S. consumer slowdown in late [second-quarter].” He also noted that watch sales, up 2.6 percent at constant exchange, represent an “impressive acceleration once we adjust for the much more challenging bases, boding very well for Richemont and Swatch,” two of the largest luxury watch firms.
Hermès sales in Asia-Pacific, excluding Japan, slipped 0.6 percent, despite what Maury described as “strong development” in China. A Maison Hermès slated to open in Seoul on Nov. 8 should improve Hermès’ fortunes in the region in the second half, she added.