PARIS — Confirming strong global demand for luxury goods, Hermès International on Wednesday reported that sales jumped 25.5 percent in the first quarter, as shoppers snapped up its iconic silk scarves, watches and perfume.

This story first appeared in the May 12, 2011 issue of WWD. Subscribe Today.

Despite the better-than-expected results, the French luxury firm stuck to its conservative guidance for 2011, saying prospects for the rest of the year were uncertain in light of the catastrophe that struck Japan, which accounts for 16 percent of sales.

Hermès posted revenues of 637.1 million euros, or $870.8 million, in the three months ended March 31, up from 507.7 million, or $703.4 million, in the year-ago period, representing a rise of 20.7 percent when stripped of the impact of currency fluctuations. Dollar figures are calculated at average exchange rates for the period concerned.

“The first quarter was very good. The momentum observed throughout 2010 continued through the first three months of the year,” said Mireille Maury, managing director of finance and administration.

Hermès reiterated its goal of average annual sales growth of 8 to 10 percent at constant exchange rates, below the 18.9 percent achieved last year.

The figures come on the heels of healthy results at luxury group LVMH Moët Hennessy Louis Vuitton, which owns a 20.2 percent stake in Hermès. The owner of the Louis Vuitton, Kenzo and Celine brands posted a 17 percent rise in sales during the first quarter, while rival PPR’s luxury division recorded a 26.2 percent increase in revenue during the period.

The luxury goods industry as a whole is set to post growth of 8 percent this year to 185 billion euros, or $265 billion, according to a recent study by consultancy Bain & Co. and Italy’s Fondazione Altagamma.

Hermès reported that sales in its own stores were up 24.2 percent in the first three months of the year, off an equally strong start to 2010.

Wholesale revenues were up 32.1 percent during the period, with watches posting a 39.5 percent increase and perfumes up 33.6 percent.

Sales steamed ahead in all regions except Japan, where the earthquake and tsunami of March 11 halted what had been a favorable growth trend since the start of the year. Sales in Japan ended the quarter up 11.9 percent in published terms, but just 0.3 percent higher at constant exchange rates.

Hermès reiterated its long-term commitment to Japan and thanked employees there for “the extraordinary courage and dignity they have shown in coping with this terrible situation.” Japan has traditionally been the company’s biggest market, but Maury said Greater China, including Hong Kong, accounted for 20 percent of sales during the first quarter.

Sales in Asia-Pacific, excluding Japan, have been booming and recorded another 33.5 percent leap in the first three months of the year. In the Americas, revenues were up 35.6 percent, while Europe was up 21.6 percent.

In France, sales rose 19.4 percent, helped by the success of the new Hermès flagship on Rue de Sèvres in Paris, its second-largest unit worldwide, which opened in November. “We are seeing a lot of traffic, and turnover is really far above what we were expecting,” Maury said of the Left Bank store.

She also reported a favorable reaction to Christophe Lemaire’s first collection as designer for women’s rtw, which was shown in March.

Having sold its 45 percent stake in Jean Paul Gaultier to Spanish group Puig earlier this month, Hermès has severed all ties to the Parisian couturier, who designed its women’s rtw between 2003 and 2010. Hermès said it would book accounting profits of 30 million euros, or $43 million, from the disposal, as reported.

It will continue to invest in its distribution network, with plans to open or renovate some 24 units worldwide in 2011, Maury said. Overall investment will total 230 million euros, or $330 million, she added.

Maury said Hermès hoped to proceed soon with the formation of a nonlisted holding company grouping more than 50 percent of the capital, part of its plan to thwart any potential takeover attempt by LVMH.

French stock market authority AMF has approved the move, but minority shareholders filed an appeal. A Paris court is due to hear arguments in the appeals case on May 19 and will probably set a date for a ruling during that session.


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