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Hermès Sales Growth Slows on China, Europe Attacks

Hermès said sales growth slowed after attacks in Brussels and Paris put off some tourists and an economic slowdown in China weighed on demand.
Hermès store | Source: Shutterstock
By
  • Reuters

PARIS, France — French luxury goods group Hermès said sales growth slowed in the first three months of the year after attacks in Brussels and Paris put off some tourists and an economic slowdown in China weighed on demand.

The 6.2 percent rise in revenue at constant exchange rates to €1.19 billion (£927 million) compared with 7.2 percent growth in the last quarter of 2015 and 8.1 percent overall for 2015.

Hermès reiterated on Thursday that 2016 sales growth could be below its medium-term target of eight percent at constant exchange rates, citing global economic, geopolitical and monetary uncertainties.

The first quarter increase, which was driven by higher sales at its leather goods division, was slightly above analyst estimates and outpaced rivals in the industry, however.

Luxury goods industry leader LVMH said this month that it registered no sales growth at its fashion and leather goods division in the first quarter. Comparable growth at Kering's luxury business reached 2.6 percent.

Retail tax-refund services company Global Blue said spending on luxury goods by Chinese shoppers abroad fell last month for the first time since it began compiling such figures in 2010.

Hermès said it achieved a 15.4 percent rise in quarterly leather goods and saddlery revenue, accounting for half of total group sales, "driven by sustained demand and the increase in production capacities at the two new sites" in France.

Ready-to-wear and accessories sales slipped 1.9 percent due to a slowdown in Asia, the United States and France, while the Islamist militant attacks in Europe and slowing sales in Greater China and the US dragged silk and textiles revenue down 9.2 percent.

The maker of printed silk scarves and Kelly handbags said its watches business was hurt by a "still challenging market, particularly in Asia, excluding Japan," meanwhile.

Hermès reiterated on Thursday that 2016 sales growth could be below its medium-term target of eight percent at constant exchange rates, citing global economic, geopolitical and monetary uncertainties.

"In the current environment, it's always better to under-promise and over-deliver," RBC Capital Markets analysts wrote, adding that "Hermès' business model remains more resilient than its peers."

Shares in Hermès were up 1.7 percent by 0811 GMT, giving it a market value of €33 billion.

By James Regan and Pascale Denis; editors: Geert De Clerq and Keith Weir.

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