The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
PARIS, France — French luxury handbag maker Hermès International reported a 10 percent jump in full-year profit, boosted by Asian sales of leather goods and Birkin handbags and as tourists return to its stores in Europe.
Operating profit climbed to 1.7 billion euros ($1.8 billion) on an adjusted basis, the Paris-based company said Wednesday in a statement, in line with the average analyst estimate. The profit margin widened to a record 32.6 percent of sales from 31.8 percent in 2015.
The luxury industry has been reporting signs of improvement after years of ebbing demand in China and a slowdown in European tourism. Tiffany & Co. reported higher-than-expected earnings last week, helped by new stores in Asia and higher-priced jewelry. Gucci owner Kering SA has reported its fastest revenue growth in four years.
Hermès is facing a gradual slowdown in sales growth after outperforming rivals in past years, helped by its product range, which is one of the most exclusive among listed luxury-goods makers. Revenue increased 7.4 percent in 2016 at constant exchange rates, the slowest pace in seven years, the company said last month. In September, Hermès abandoned a mid-term annual forecast for sales growth of about 8 percent, replacing it with a goal for "ambitious" growth.
Shares of Hermès have risen 38 percent in the past year, outpacing the 12 percent increase in a Bloomberg Intelligence index of luxury-goods stocks.
The group’s flagship Prada brand grew more slowly but remained resilient in the face of a sector-wide slowdown, with retail sales up 7 percent.
The guidance was issued as the French group released first-quarter sales that confirmed forecasts for a slowdown. Weak demand in China and poor performance at flagship Gucci are weighing on the group.
Consumers face less, not more, choice if handbag brands can't scale up to compete with LVMH, argues Andrea Felsted.
As the French luxury group attempts to get back on track, investors, former insiders and industry observers say the group needs a far more drastic overhaul than it has planned, reports Bloomberg.