How Asia Has Driven Hermes’ Latest Sales Hike

Feeling the impact of a stronger euro, Hermès International posted a 3.1 percent rise in sales over the first quarter, with growth led by Asia.

At constant exchange rates, growth at the company, known for its high-end silk scarves and Birkin handbags, was 10.8 percent, reaching 1.39 million euros, with the fastest advance from Asia, up 14 percent at constant rates to 714.7 million euros. The company noted its new Landmark Prince flagship store, which it opened in January in Hong Kong, had done well.

In terms of activities, sales gains were led by ready-to-wear and accessories, up 17.1 percent at constant rates, and a grouping of “other sectors,” which include jewelry and home products, that rose 23.1 percent. Perfume sales also grew briskly, up 16.1 percent at constant rates.

The performance beat expectations, Rogerio Fujimori, analyst with RBC Europe, said in a research note. Fujimori, who said he had expected an 8 percent rise in sales at constant rates, flagged growth in Asia, as well as “particularly strong performances” in ready-to-wear and perfumes.

The leather goods and saddlery division met expectations with growth of 7.5 percent at constant rates, according to Fujimori, who forecasts the division’s growth will accelerate over the second half to around 10 percent, thanks to added workshop productivity.

Hermès has been gradually expanding the number of its workshops in France to meet demand for its famous handbags, which include its iconic Birkin and Kelly models, as well as Constance, Bolide and Roulis purses.

In its earnings release, Hermès noted increased production capacities thanks to the opening of its Manufacture de L’Allan in April.

Sales in Europe rose 6.5 percent at constant rates to 421.5 million euros, and the Americas clocked 8.8 percent growth to 230.2 million euros. Currency fluctuations had a negative impact of 104 million euros, the company said.

Hermès said it confirms an “ambitious goal for revenue growth at constant exchange rates,” despite global geopolitical uncertainties.

Luca Solca, head of luxury goods at Exane BNP Paribas, said the quarterly performance was solid, and noted the company has “many cards to play on both product innovation and distribution – physical and digital.”

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