After Stronger-Than-Expected Q2, Hermés Headed to Another Record Year?

In What's New, Industry News by Jeff Prine

HermesParis—Buoyed by a 12% jump in its second quarter sales, Hermés said today that its full year revenue is well on its way achieving  an operating margin close to its historical high achieved in 2012.

“Demand for Hermés items remains strong,” the company said. “In light of the sales achieved in the first half of the year, consolidated sales at constant rates could slightly exceed the mid-term growth target of 10%.” Moreover, as it heads into fall/winter, Hermés will be closer to reaching last year’s record 32.1% operating margin.

Helping to achieve that goal, Hermés’ second quarter sales exceeded expectations: rising  to 910.4 million euros (about $1.2 billion). That’s well ahead of the 874.4 million euros in sales analysts’ average estimate had expected. Sales excluding currency fluctuations rose 16%, beating estimates for a 13.5% increase.

Much of the sales gains were driven by ready-to-wear and accessories sales where increases were up 21%.

Only Watch Sales Are Weak

In its Leatherwork & Saddlery division sales were up 10%. Sales of handbags and leathergoods “remains constrained by production capacity.” To that end, the company said it plans to expand the two factories that opened in 2012 in Isère and Charente-Maritime as well as developing two new facilities for artisanal work.

Meanwhile the Silk/Textiles division posted a 13% increase and the fragrance division was up 20% thanks to its Jour d’Hermès and Terre d’Hermès perfumes.

While the company’s jewelry and Art of Living divisions continued to grow, the watch division posted a 1% decline “affected by the general downturn in the watch industry and the high basis for comparison of the previous year.”

Business was strongest in North America and Asia. Even Japan “confirmed the turnaround observed in the first quarter” with an 8% sales increase.

The Americas posted a 17% increase. As for Greater China, Hermès said, “Despite a less positive environment, the Chinese market continued to display great vitality.” Sales rose 17% in the region.

Even France (up 13%) and the rest of Europe (up 14%) “posted remarkable performances in a difficult economic environment.”

“We are seeing growth in all of our divisions,” Axel Dumas, chief executive, told Reuters, saying only that sales growth was slower in watches.

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