Hermes sales surge on luxury 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.

By InvestSMART · 20 Jul 2012

By InvestSMART ·
20 Jul 2012

Comments

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.

Go to Google News, then click "Follow" button to add us.

Share this article and show your support

Frequently Asked Questions about this Article…

What caused Hermès' second-quarter sales beat and how much did revenue grow?

Hermès reported a sales beat driven by surging demand in Asia. Second-quarter sales rose 22% to €814.5 million, topping the €799.3 million average of analyst estimates. On a constant-currency basis, revenue increased 13%.

How strong was Hermès' performance in Asia and did Japan follow the same trend?

Asia was the strongest region: second-quarter sales in Asia (excluding Japan) surged 27% at constant exchange rates. Japan was the exception, where revenue fell 1.1% on the same basis.

What guidance did Hermès give for profit and operating margins?

Hermès said first-half recurring operating income should be in line with the 22% sales growth seen in the period. The company expects its full-year operating profit margin to fall between the margins achieved in 2010 and 2011.

What revenue-growth target has Hermès reiterated for investors?

Hermès repeated its goal of achieving revenue growth of about 10% a year, excluding the effects of currency shifts.

How did Hermès' product categories perform in the quarter?

Leather goods revenue advanced 7.4%, silk and textiles rose 16%, and ready-to-wear and fashion accessories grew 22% in the reported period.

How did Hermès' shares and the broader luxury sector react to the results?

Hermès shares gained as much as 1.9% on the stronger-than-expected results. However, European luxury stocks had recently fallen after Burberry reported sales that missed estimates, which raised concerns about demand and macro risks.

What was Hermès' regional sales performance in Europe and the Americas?

At constant exchange rates, sales climbed 6.8% in France and 16% in the rest of Europe. Overall European revenue advanced 12% (slower than the first quarter's 21% pace). In the Americas, sales rose 8.2%.

Does any major luxury rival have a stake in Hermès?

Yes. LVMH Moët Hennessy Louis Vuitton SA owns a 22.3% stake in Hermès, according to the company statement.