Hermès Posts Smallest Sales Increase Since 2009

In Industry News, What's New by Jeff PrineLeave a Comment

HermesParis—After posting record-breaking sales for 2012 in February, Hermès International SCA today reported its slowest revenue growth in three years as its leathergoods sales slowed and its watch sales declined.

For its first quarter of fiscal 2013, Hermès said revenue rose 12.8% at constant currencies to 856.8 million euros (about $1.12 billion). That was good enough to beat analysts’ average estimate for an 11% increase, but was the smallest sale advance since the last quarter of 2009.

Best performing categories were apparel, fashion accessories and footwear which saw an 18% increase. Silk & Textiles, which include scarves, was up 15% thanks to increased production capacity.

However, sales of leathergoods, the company’s biggest business, slowed to a 7.3% increase compared to a 17.6% increase in the same quarter a year ago. The blame for the slowdown was put on lowered deliveries from its workshops.

Rebound by Year’s End?

But Hermès’s overall performance slowed from the same period last year when revenue rose 17.6% as growth in sales of leather bags roughly halved from the fourth quarter to 7%, a drop it blamed on lower deliveries from its workshops.

But Patrick Thomas, chief executive, indicated that sales will edge up as production improves. “It was a problem with deliveries as production was weak in January and February but our sales growth should stabilize to about 8-9% this year,” Thomas told Reuters.

Two categories showed declines: tableware and watches. Sales of timepieces declined 5.3% (excluding currency fluctuations) due to weaker demand from China. That’s compared to a 27% jump in the same quarter last year.

Hermès noted that watch sales, too, may have suffered due to Chinese President Xi Jinping’s campaign against corruption which pointed out watches as one of the most popular symbols of conspicuous consumption.

“The depression is momentary,” Thomas said however.”We expect a revival at the end of the year.”

Hermès has been moving to expand its vertical production of watches, most recently increasing its stake in Joseph Erard, a Swiss case maker, from 32.5% to 51%.




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