“Defying Gravity” Hermès Q3 Leaps 24.2%

Paris—Unlike luxury brands such as Louis Vuitton and Gucci which has reported slowdowns in sales in recent quarters, Hermès continues to barrel ahead, posting today a 24.2% leap in its third quarter sales.

Indeed, at its current rate, total year sales at constant exchange rates could exceed 13%–and the current operating margin is likely to fall in between the 2010 level of 27.8% and 31.2%, its record high in 2011.

“Globally, we do not see any slowdown anywhere…including in Asia,” Patrick Thomas, Hermès’ceo, said.

The luxurygoods company said its third quarter sales rose 24.2% at current exchange rates (15.7% at constant currencies) to 849 million euros (about $1.1 billion), and an increase from 13.4% gain in its second quarter. That was well ahead of analysts’ estimate for 803.8 million euros in sales.

Although there has reportedly been a slowdown in luxurygoods sales in China, Hermès didn’t experience it. Instead, its sales there were up 36% in the third quarter, comprising about 25% of Hermès’ entire turnover, Thomas said.

Sales in Europe increased 16.7% and in the Americas were up 27%.

Limited Growth Strategy is Working

By category, leathergoods and saddlery were up 20.5% to 385 million euros. Ready-to-wear and fashion accessories rose 30.5%; silk and textiles had a 22.8% gain. Watches increased 14.5%. Hermès’ “other categories” which include its jewelry collections, posted a 65.8% increase.

Thomas said sales at Hermès’ own store were “extremely robust” even when up against a high comparison from last year.

The company also posted a 22.7% growth in its nine month revenue to 2.44 billion euros, at current exchange rates (up 15.5% at constant exchange rates.)

Hermès’ chief executive credited the company’s strategy of limited growth as helping to keep demand high for its exclusive products.

Moreover, Hermès can only grow 10% a year in terms of amount of product it produces since it can only hire and train 100 to 250 artisans a year.

Given the current growth rates, Hermès forecast that its 2012 sales at constant exchange rates could exceed 13%, an increase from its previous forecast for 12% that had been raised from 10% in August.

Saying that Hermès was “defying gravity that had impacted a number of other European luxury players,” UBS analysts raised their full year forecast for the company to 13.9% from 12.4%.

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