Her­mès Re­as­sures on China With Sales Rise

WWD Digital Daily - - News - BY MIMOSA SPENCER

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.

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