Asian consumers help Hermes22 July 2010
Hermes, the French maker of luxury leather handbags and silk scarves, raised its 2010 revenue forecast after second-quarter sales increased faster than analysts estimated on demand in Asia. Full-year revenue may grow as much as 12%, excluding currency swings, Paris-based Hermes said today. The 173-year-old company in March forecast revenue would gain at least 5%.
Demand for luxury goods is accelerating as Chinese shoppers buy more high-end clothing and accessories, and US and European retailers replenish inventories after the recession. Hermes sales gained 23% in the first half and the company said operating profit rose at a faster pace, helped by growth in high-margin products such as textiles, leather wear and watches.
Hermes shares gained 3.6%, to 118.95 euros at close of trading in Paris on July 21. The stock has risen 27% this year, giving the company a market value of 12.6 billion euros ($16.2 billion).
Over the year, the operating margin is expected to widen by at least one percentage point compared with 2009, depending on currencies, Hermes said.
The pace of sales growth in the first six months will not be sustained in the second half, Hermes said in the statement. The second quarter was beyond expectations, leading to the higher full-year sales growth target, the company said. The target does not take into account economic factors that could significantly alter the business environment, Hermes also said.
Second-quarter revenue jumped 57% in Asia, excluding Japan, where sales gained 10%, Hermes said. Sales increased 20% in Europe and 36% in the Americas. Hermes plans to open or renovate about 20 stores this year, including a new boutique on Rue de Sevres in Paris.
Sales of leather goods increased 32%, while revenue from silk ties and scarves gained 24%, Hermes said. Apparel sales climbed 26%. Revenue rose 36% for watches and 17% for perfumes. Sales of both product lines were hurt last year as third-party distributors ran down inventories. Tableware sales slipped 2.2%.
Sales of apparel, accessories, fragrances and watches will probably recover this year, particularly in the company’s own stores, CEO, Patrick Thomas said in March. Leather items as a percentage of sales will fall to 45% predicts Thomas.