In its quarterly report—that topped most of its luxury rivals—Hermès posted sales of 637.1 million euros (about $918 million) from 507.7 million euros in its first quarter 2010. The sales exceed analysts’ average estimates for sales of 598 million euros. Excluding currency swings, sales climbed 21%.
Sales grew 20% in Europe, 27% in Asia (except Japan) and 33% in the Americas, at constant exchange rates, driven by the company’s silks and textiles, watches and apparel and accessories businesses.
Despite Q1 Increases, ‘Prudent’ on Full Year Forecast
At constant currencies, Hermés reported sales of its silk scarves and textiles jumped 26%; watches rose 34%, apparel and accessories grew 21%, and leathergoods and saddlery rose 17%. The company also reports its perfume sales soared 33% with the introduction of a new fragrance.
The report was “very strong” and illustrates that the “stellar growth enjoyed by the luxury goods sector is not only driven by Asia,” noted HSBC analyst Antoine Belge.
“It’s worth noting that this is the latest of several consecutive quarters in which the silks and textiles unit has exceeded expectations,” CM-CIC Securities analyst Merav Atlani said in a research report.
Despite a first quarter increase that exceeded LVMH’s 14% increase and PPR’s 22.1% growth, Hermés didn’t update its full year guidance which forecast sales growth of 8% to 10% in fiscal 2011.
Citing geopolitical and economic uncertainties, Patrick Thomas, ceo, said, “I prefer to remain prudent.” He also warned that the operating margin, which reached 27.8% for 2010, could drop slightly this year due to high comparatives against last year.
“It will be in line with last year but there could be a slight decline,” Thomas added.
Hermés, too, may still see an impact from the March 11 earthquake and tsunami that hit Northern Japan. While sales had picked up in Japan prior to the earthquake, subsequently they dropped, leaving only a 0.3% increase in the quarter. Japan accounts for about 16% of Hermés’ annual sales.
Still, many analysts report that Hermés’ forecast seemed too prudent.
“The numbers are impressive,” a UBS analyst said, referring to Hermés, which is fighting off an advance by LVMH, which has built a 20% stake.
Jean-Paul Gaultier Sale May Bring 30 Million Euro Profit
“The market believes the company’s growth target is much too conservative and there could be earnings upgrades in the works,” said one Paris-based analyst. Agreeing, Pierre Lamelin, analyst at CA Cheuvreaux, wrote that Hermés’ forecast “may now seem conservative in view of the stellar start to the year.”
Earlier this month, Hermés agreed to sell its 45% stake in Jean-Paul Gaultier to Spanish Grupo Puig for 16 million euros, and repayment of a 14 million euro loan. The deal is expected to generate a profit of 30 million euros this year.
Although Hermés is fighting LVMH over a supposed takeover attempt, Hermès could be interested in acquisitions to reinforce existing areas, but doesn’t have any projects in the works, Mireille Maury, the company’s financial director told the Wall Street Journal. Of the 230 million euros the company plans to invest this year, the bulk will go on building 14 new stores and refurbishing 10 existing ones, Maury said.