Hermès Reassures on China With Sales Rise
PARIS — Hermès International has defied luxury sector jitters, posting a 9.4 percent rise in sales in the third quarter, lifted by a strong performance in Asia.
Analysts said the quarterly figures were reassuring.
“Importantly, Hermès noted no slowdown in Chinese demand — continuing a series of positive third quarter and current trading data points,” noted Luca Solca, who heads luxury goods research at Exane BNP Paribas.
Referring to “very strong growth” over the year so far in all regions, Hermès chief executive officer Axel Dumas offered a measured assessment of the group’s expectations.
“We keep our optimism for the future, but we are also thankful for the past,” the executive said in a statement.
Sales at the luxury house, known for its Birkin bags and signature silk scarves, totaled 1.46 billion euros, up 9.6 percent at constant exchanges rates. The fastest growth came from Asia, excluding Japan, up 11.8 percent to 519 million euros.
Hermès launched its e-commerce site in China last month, and executives signaled positive initial results in a conference call with analysts. The company opened a new store in Xi’an in September, on the heels of a store in Changsha, China, in the spring and the Landmark Prince store in Hong Kong at the start of the year.
Shares in luxury goods companies across Europe took a tumble recently on fears that consumption in China could falter as a trade war shapes up across the Pacific, and financial markets are keeping an eye out for any sign of disruption in that market, the sector’s main growth engine.
In Japan, where an improved economy and increase in tourists to the country have spurred luxury purchases, the company posted a brisk 8.1 percent rise at constant rates.
Sales in Europe were up 5.6 percent at constant rates, while the Americas region clocked growth of 14 percent. The company, which flagged strength in the U.K., Italy and in boutiques in Paris, plans to reopen a renovated store on Avenue George V in the French capital before the end of the year. In the U.S., the company expanded a store in Las Vegas in the third quarter and opened a new location in Palo Alto, Calif., earlier in the year.
Growth in the third quarter was driven by leather goods, ready-to-wear and accessories, with an increase of 11.7 percent at constant rates, while the perfume division, along with silk and textiles, showed declines, down 0.9 percent and 1.6 percent, respectively.
Hermès cited the Lindy, Verrou, Cinhetic and 24/24 handbag models as contributing to the performance, and noted ongoing increases in production capacity following the opening of a workshop in the FrancheComté region of France.
The silk and textiles division was facing a record-high comparison basis after unusually strong growth during the same period a year earlier.
Sales of watches rose 7.3 percent at constant rates, with Hermès noting a good performance particularly in its own stores.
“All in all, another solid quarter from Hermès with a particularly reassuring performance in the most profitable leather division, which incidentally will be lapping a relatively easy comparative in [the fourth quarter],” said analyst Rogerio Fujimori of RBC Europe in a research note to clients.
“We keep our optimism for the future, but we are also thankful for the past,” said ceo Axel Dumas.