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Hermès Profit Climbs 10% on Handbag Sales, Growth in Europe

The luxury industry has been reporting signs of improvement after years of ebbing demand in China and a slowdown in European tourism.
Hermès store | Source: Shutterstock
By
  • Bloomberg

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.

By Corinne Gretler and Thomas Buckley; editors: Eric Pfanner, Thomas Mulier and Phil Serafino.
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