Leathergoods prove strong for Hermes in Q4 with 6.6% increase

French luxury goods group Hermes (HRMS.PA) said on Wednesday that sales growth rose 6.6 percent in the fourth quarter, at constant exchange rates, coming close to market expectations.

Fourth quarter sales reached 1.505 billion euros ($1.60 billion), with growth slowing from 8.8 percent in the third quarter. This compared with analysts' expectations of 7.1 percent growth.

Hermes, known for its $10,000 Birkin bags and $400 printed silk scarves, said the improvement was driven mainly by its leather goods division, while other divisions also performed well although its watches unit fared slightly less well. The leather goods and saddlery division reported a 14-percent increase in sales to 2.6 billion euros.

"All of our models were successful, we achieved higher growth than usual," Dumas said.

The group kept its forecast for a full year 2016 operating margin being slightly higher than 2015's 31.8 percent of sales.

Hermes added it was keeping an "ambitious" medium-term goal for revenue growth at constant exchange rates, despite growing economic and geopolitical uncertainties around the world.

Hermes' revenues rose by 7.5 percent to 5.2 billion euros ($6.0 billion) last year, the first time the group has passed the five-billion-euro mark.

"Once again, we outperformed the sector, we broke through the five-billion mark and growth was healthy, because it was essentially organic growth," boasted chief executive Axel Dumas in a conference call.

"Sales grew in all regions around the world, particularly in our own-brand stores," he continued.

Japan performed "exceptionally" well, despite the rise in the value of the yen.

Sales also continued to increase in Asia and America, Dumas said.

France also performed well, "even if it was still impacted by weaker tourist numbers" in the wake of the series of jihadist attacks.

Hermes is scheduled to publish full details of its 2016 earnings on March 22, but it said that underlying profitability "should be slightly above 2015."

Looking ahead to the current year, Hermes did not provide any concrete forecast, but confirmed its "ambitious" sales growth target.

"I'm fairly optimistic because Hermes' fundamentals are good," CEO Dumas said.

"In a period of high uncertainty, it's difficult not to be cautious. But I think we'll do better than the sector," he said.


Reuters, with AFP