Hermes sales surge on luxury demand in Asia

Hermes International SCA has reported second-quarter sales that beat estimates on surging demand in Asia.

By InvestSMART · 20 Jul 2012

By InvestSMART ·
20 Jul 2012

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Hermes International SCA has reported second-quarter sales that beat estimates on surging demand in Asia.

HERMES International SCA, the French maker of silk scarves and leather goods, has reported second-quarter sales that beat estimates on surging demand in Asia and said first-half profit growth matched the improvement in revenue.

Sales rose 22 per cent to ?814.5 million ($A968.4 million), the Paris-based company said yesterday, exceeding the ?799.3 million average of three analysts' estimates compiled by Bloomberg. Revenue increased 13 per cent excluding currency shifts.

Hermes, in which LVMH Moet Hennessy Louis Vuitton SA owns a 22.3 per cent stake, has repeated its goal of revenue growth of 10 per cent a year, excluding currency shifts. The shares gained as much as 1.9 per cent. European luxury stocks fell last week after Burberry Group reported sales that missed estimates, fuelling concern that the debt crisis and slowing growth in China were taking a toll on demand for high-end goods.

First-half recurring operating income should be in line with the 22 per cent rate that sales grew in the period, Hermes said in a statement. Its full-year operating profit margin should be between that achieved in 2010 and 2011.

Second-quarter sales surged 27 per cent in the Asia region at constant exchange rates, accelerating from the first quarter, the company said. That excluded Japan, where revenue fell 1.1 per cent on the same basis.

Sales climbed 6.8 per cent in France and 16 per cent in the rest of Europe at constant exchange rates, Hermes said.

Overall in Europe, revenue advanced 12 per cent, slowing from the first quarter's 21 per cent rate.

In the Americas region, sales gained 8.2 per cent at constant exchange rates, the company said.

Leather-goods revenue advanced 7.4 per cent, and silk and textiles gained 16 per cent, while ready-to-wear and fashion accessories grew 22 per cent.

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Frequently Asked Questions about this Article…

What were Hermès' second-quarter sales and did they beat estimates?

Hermès reported second-quarter sales up 22% to €814.5 million (about A$968.4 million), beating the €799.3 million average estimate compiled by Bloomberg. Revenue rose 13% when excluding currency shifts.

What drove Hermès' sales surge in the quarter?

The company attributed the sales surge mainly to strong demand in Asia, where sales rose 27% at constant exchange rates (excluding Japan). Growth was also supported by gains across product lines such as ready-to-wear, silk and textiles, and leather goods.

How did Hermès perform across regions like Asia, Europe and the Americas?

Regional performance varied: Asia (excluding Japan) surged 27% at constant exchange rates while Japan saw a 1.1% decline. Europe overall rose 12% (France +6.8%, rest of Europe +16%) and the Americas grew 8.2% at constant exchange rates.

Which Hermès product categories grew the most?

Ready-to-wear and fashion accessories led with 22% growth, silk and textiles increased 16%, and leather goods advanced 7.4% in the period reported.

What guidance did Hermès give on revenue growth and profit margins?

Hermès reiterated its goal of delivering 10% revenue growth per year excluding currency shifts. It said first-half recurring operating income should match the 22% rate of sales growth for the period, and full-year operating profit margin should fall between levels achieved in 2010 and 2011.

How did the stock market react to Hermès' results?

Hermès shares gained as much as 1.9% following the stronger-than-expected sales report. The article also noted broader weakness in some European luxury stocks after Burberry missed estimates.

Does LVMH have a stake in Hermès and why is that mentioned?

Yes. The article notes that LVMH Moët Hennessy Louis Vuitton owns a 22.3% stake in Hermès, a fact often mentioned because ownership stakes can be relevant to investors watching industry relationships and corporate dynamics.

What are the key takeaways for everyday investors from Hermès' report?

Key takeaways: Hermès beat sales estimates with strong Asia demand, posted double-digit revenue growth excluding currency effects, and kept its 10% annual revenue-growth goal. Profit growth matched revenue improvement, and the stock rose modestly. Investors should also note regional differences—Japan lagged—and recent sector volatility after other luxury names reported softer results.