Hermes lifts 2012 sales target on Asia boost
French luxury giant Hermes raised its annual sales growth target after posting double-digit revenue and profit increases in the first half, confirming the resilience of the industry despite global economic turmoil.
The maker of €10,000 leather bags and silk dresses, in which the billionaire owner of rival Bernard Arnault owns 22.3 per cent, is now targeting 12 per cent annual growth at constant exchange rates, up from a previous target of 10 per cent.
Appetite from emerging market shoppers – in particular the Chinese – for designer clothes and leather access-ories has shielded luxury goods makers such as Hermes and LVMH from headwindsin Europe.
“A good and reassuring publication for Hermes,” Cheuvreux analyst Thomas Mesnin said in a note, adding that concerns prompted by management in March about profitability did not seem to be justified.
Chief executive Patrick Thomas said that sales trends in July and August were in line with the first half.
Hermes confirmed expectations that the operating margin for 2012 would likely fail to match its all-time high in 2011 as it continues to develop its distribution ne work.
The retail-driven luxury industry is facing margin pressure because of unfavourable exchange rates and higher costs that companies can only partially pass on to consumers, especially in Europe.
But strong brands like Hermes can rely on big spenders who put quality before price.
Mesnin said the company’s guidance of a full-year operating margin between 27.8 per cent of sales in 2010 and 31.2 per cent in 2011 seemed conservative if compared with the 32.1 per cent in the first-half. Cheuvreux has a current estimate of 31 per cent.
The maker of silk scarves and €1 million crocodile leather jackets said first-half net profit grew 28 per cent, adjusting for a one-off gain from asset sales in 2011, to €335.1 million.
Growth was driven by big-spending Asian markets like China, Singapore and Hong Kong, which defied slowdown fears with 25 per cent sales growth in the first half.
Hermes sales rose 21.9 per cent to €1.59 billion in the first half, up 15.4 per cent.