Defying Luxury Slowdown, Hermès Q4 Sales Strong

In What's New, Industry News by Jeff Prine

Hermès' spring ad campaign

Hermès’ spring ad campaign

Paris—While the negative effects of the weak yen may have hurt somewhat, Hermès International SA today reported its fourth quarter sales increased 4.6% as demand in China and North America rose.

Net revenue for the final quarter of 2013 was 1.09 billion euros (about $1.48 billion), slightly under the 1.11 billion euros analysts forecast.

Without the impact from currency fluctuations–particularly the weaker yen, sales would have increased 11% in the quarter.

No Slowdown in China Either

While sales slowed from its third quarter increase of 12.9%, CEO Axel Dumas blamed the higher comparables for the quarter.

Sales increased in France by 7.6% and were up 11.4% in the rest of Europe. The Americas posted an 8.5% increase (in constant currencies) Asia-Pacific, particularly China, had a 20% sales increase. Hermès said fourth-quarter sales rose 11 percent, against growth of 12.9 percent in the third quarter, a slowdown Dumas blamed on a higher comparative basis in the period under review.

Due to the yen, Hermès said it would raise prices in Japan by 10% but would raise prices elsewhere by 3% to 5% percent

For its full year, sales rose 7.8% (or 13% excluding currency fluctuations) to 3.75 billion euros (about $5.13 billion), a record for the luxurygoods maker.

Currency fluctuations aside, Hermès’ report was better than some other high end luxury brands which have reported slower sales in China following the government’s campaign against corruption and the giving of extravagant gifts.

“Hermès has not felt the slowdown,” Dumas said. “Chinese customers are looking increasingly for high quality and discreet products, “and that is good for us.”

Despite the 2013 increases, Hermès gave what analysts called a cautious outlook for 2014, maintaining its forecast for 10% growth, below the 13% experienced last year. Operating margin should slightly exceed its record of 32.1% in 2012.

Hermès reports its 2013 earnings on March 20.




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