Backstage at Hermès Men's Fall 2016

PARIS — One of luxury’s steadiest engines anticipates more of an uphill climb in 2016.

This story first appeared in the February 11, 2016 issue of WWD. Subscribe Today.

Citing economic, geopolitical and monetary uncertainties, Hermès International warned that 2016 sales growth could be below its medium-term revenue goal of 8 percent at constant exchange rates.

The dim outlook came even as the French luxury firm reported a 14.5 percent bump in fourth-quarter revenues, reflecting buoyancy in all regions and despite a drop in sales of silk and textile items in the wake of the Nov. 13 terror attacks in France.

According to analysts, traffic took a particular hit at the brand’s flagship on the Rue du Faubourg Saint Honoré, popular with tourists.

Hermès said sales reached 1.4 billion euros, or $1.53 billion, in the three months ended Dec. 13. Stripping out the impact of currency, the gain stood at 7.2 percent.

At constant exchange rates, sales advanced 16.2 percent in Japan; 11.6 percent in Europe, excluding France; 8.2 percent in the Americas; 5.2 percent in Asia-Pacific, excluding Japan, and 1 percent in France.

The company noted that Hong Kong and Macau remain difficult, and cited a “contrasting environment” in the U.S., where Hermès last year opened a new location in Miami and unveiled renovated and expanded units in Houston and Dallas.

By product category, sales gained 14.3 percent in leather goods and saddlery; 6.3 percent in watches, and 3.7 percent in ready-to-wear and fashion accessories.

Hermès trumpeted “the success of the latest ready-to-wear collections, especially that of Nadège Vanhee-Cybulski’s first collections, and the dynamic fashion accessories sector, particularly shoes.” Vanhee-Cybulski joined the company in 2014 following stints designing at Céline and The Row.

Perfume sales dipped 4.5 percent, which Hermès blamed on tough comps due to a slew of launches in 2014, while sales of silks and textiles fell 7.2 percent, “hard hit by the year-end events in France” and “slowing sales in Greater China,” according to the company.

Hermès is to report full results on March 23 and noted that operating profits should be close to 2014 levels, despite the impact of exchange rates.

Currency fluctuations wiped 389 million euros, or $431.9 million, from full-year tallies at Hermès, which saw revenue rise 17.5 percent to 4.84 billion euros, or $5.38 billion.

Dollar figures are converted from euros at average exchange rates for the periods in question.

In a research note, HSBC analyst Antoine Belge applauded better-than-expected fourth quarter sales and highlighted strength in Europe “despite being impacted by the events in France in November…which proved the defensive status of the company.”

He noted that France generates 16 percent of group sales.

“Hermès is perceived as a safe haven, especially in tougher market conditions, which warrants a premium in our view,” the HSBC note said. “The reason why Hermès should continue to trade at a substantial premium to peers is that its distinctive positioning should allow it to outperform the industry both in good times (consumers trading up to Hermès) and bad times (consumers trading less but still buying Hermès).”

In a conference call with analysts, Hermès said it plans to open three to five stores this year, including one in China, plus refurbish 20, a similar pace to 2015, according to HSBC.

Ramping up production in Isère and Charente allowed the company to boost sales of leather goods beyond its own long-term target of 10 percent a year.

While Hermès shares fell as much as 3.6 percent in early morning trading on the Paris bourse, they finished up 1.5 percent to 302.30 euros amid a market rally in Europe.

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