Hermes store in Hong Kong

PARIS — Hermès International posted a 3.1 percent rise in sales over the first quarter, as a strong euro weighed on brisk business, particularly in Asia.

At constant exchange rates, growth at the company was 10.8 percent, reaching 1.39 million euros. The fastest advance came from Asia, up 14 percent at constant rates to 714.7 million euros. The company noted its new Landmark Prince flagship, which it opened in January in Hong Kong, had done well.

In terms of activities, sales gains were led by ready-to-wear and accessories, up 17.1 percent at constant rates, and a grouping of “other sectors,” which include jewelry and home products, that rose 23.1 percent. Perfume sales also grew briskly, up 16.1 percent at constant rates.

“All of the métiers have posted strong growth, as well as all regions,” said Axel Dumas, executive chairman of Hermès, referring to the different activities.

The performance beat expectations, Rogerio Fujimori, analyst with RBC Europe, said in a research note. Fujimori, who said he had expected an 8 percent rise in sales at constant rates, flagged growth in Asia, as well as “particularly strong performances” in rtw and perfumes.

The leather goods and saddlery division met expectations with growth of 7.5 percent at constant rates, according to Fujimori, who forecasts the division’s growth will accelerate over the second half to around 10 percent, thanks to added workshop productivity.

Hermès has been gradually expanding the number of its workshops in France to meet demand for its famous handbags, which include its iconic Birkin and Kelly models, as well as Constance, Bolide and Roulis purses.

In its earnings release, Hermès noted increased production capacities because of the opening of its Manufacture de L’Allan in April. Two other production sites in France are scheduled for completion by 2020.

Sales in Europe rose 6.5 percent at constant rates to 421.5 million euros. In the Americas, Hermès clocked 8.8 percent growth to 230.2 million euros, and said it opened a store in Cancún, Mexico at the end of the quarter. Currency fluctuations had a negative impact of 104 million euros, the company said.

The company’s silk and textiles business posted a 6.6 percent rise at constant rates, and watches grew 11.5 percent at constant rates.

Hermès said it confirms an “ambitious goal for revenue growth at constant exchange rates,” despite global geopolitical uncertainties.

Luca Solca, head of luxury goods at Exane BNP Paribas, said the quarterly performance was solid, and noted the company has “many cards to play on both product innovation and distribution — physical and digital.”

In the digital sphere, Hermès rolled out its new web site in Europe at the end of the quarter, following its debut in North America.

In a note to clients last month, Solca adopted a more positive view on shares of Hermès, citing the possibility that trade tensions between the U.S. and China could weigh on Chinese consumer sentiment. Given the importance of the Chinese market to the luxury sector, in Solca’s view a worsening of that market’s prospects could prompt investors to take refuge in Hermès shares, which are seen as a “safe haven” compared to other luxury peers.

Hermès was the last of the large French luxury houses to report first-quarter sales, and was outpaced by its larger peers. LVMH Moët Hennessy Louis Vuitton last month reported a 10 percent rise in first-quarter sales, up 13 percent on an organic basis, propelled by a 16 percent organic growth from the fashion and leather goods division.

Kering, meanwhile, sped ahead of its rivals with a 27.1 percent rise in sales, up 36.5 percent at constant rates, boosted by the continual rise of its star brand Gucci.

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