Retail | Hermes second-quarter sales accelerate, despite Macau, HK rut

Hermes International SCA reported a 22 percent increase in second-quarter sales as growth in Japan offset a slowdown in Hong Kong and Macau. Revenue rose to 1.17 billion euros (USD1.27 billion), Paris-based Hermes said in a statement yesterday. Analysts predicted 1.16 billion euros, according to the median of 14 estimates compiled by Bloomberg. Excluding currency swings, sales climbed 10 percent, beating analysts’ expectations for an 8.9 percent advance.
Hermes, like other lux-
ury goods makers, is feeling the effects of slowing demand in China after years of double-digit growth. Still, the Birkin-bag maker’s high prices and limited supply have helped cushion the blow, and the 178-year-old company is the least exposed of peers to slumping demand in Hong Kong, where it has seven stores, Sanford C. Bernstein has said.
While the company retained its mid-term goal for revenue growth of about 8 percent at constant exchange, the first-
half operating margin should be down “slightly” on the year-earlier period because of the weaker euro, Hermes said.
Hermes said in March currency volatility will continue to drag on profitability. Year-ahead hedging rates mean currency shifts will narrow the operating margin by 0.5 percentage points in 2015, the company said at the time.
Fewer wealthy Chinese are purchasing expensive bags and coats in Hong Kong, preferring instead to shop in Japan and Europe where it’s cheaper. U.K. luxury-goods maker Burberry Group Plc said last week it may try to lower its rent bill in the island city to offset a worsening slump there that drove sales growth to a two-year low. Exports of Swiss watches to Hong Kong dropped 21 percent in June, the Federation of the Swiss Watch Industry said yesterday.
Hermes’s second-quarter sales surged 27 percent in Japan at constant exchange rates, accelerating from the 15 percent gain in the first three months of 2015 and smashing analysts’ estimates by about 10 percentage points. Sales in the rest of Asia Pacific gained 6 percent, just shy of expectations.
Leather goods and saddlery was the best performing product category with sales rising 15 percent on the same basis, ahead of estimates. Watches returned to growth after five quarters of declines. Andrew Roberts, Bloomberg