BUSINESS - 23 March 2017 - by BlogLux
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Hermes Defies Luxury Market



Hermes International (HESAY)  said Wednesday that its last fiscal year was "exceptional" even as the luxury goods sector struggled from a slowdown in European sales linked to terrorist attacks and increasingly competitive markets in China.

The French luxury goods company famous for its silk scarves said revenues passed €5 billion ($5.4 billion) for the first time in 2016, hitting €5.2 billion after rising 7.4% on a constant currency basis. Operating income increased 10% to €1.7 billion and net profit was up 13% to €1.1 billion, the Paris-based group said.

Hermes shares were marked 0.7% lower in the opening 90 minute of trading in Paris, largely in-line with the broader CAC-40 benchmark, and changing hands at €425.40 each. Hermes stock has gained 10.14% over the past three months, well ahead of the 8.28% advance for the S&P Global Luxury Index.

"We did better than we expected in 2016 and we are entering 2017 on a solid base but remain cautious in view of an uncertain environment," CEO Axel Dumas told a conference call, Reuters reported.

Growth in the full year was driven by success in the luxury house's Leather Goods and Saddlery division. Sales in the division, whose products includes bags, riding gear, diaries and small leather good, increased 14% to €2.6 billion.

The perfumes division saw 8.5% growth in the perfumes division, with sales coming in at €261.9 million. Perfumes however experienced a bumper fourth quarter with sales increasing 16.9%, making it the fastest growing in the three months to Dec. 31, 2016.

Hermes silk and textiles division was hit hard in the first half of the year by terrorist attacks in Europe, which hit tourism, and a slowdown in sales in China. However, the business unit bounced back in the fourth quarter, reporting an 11% growth in sales.  

Hermes joined other luxury houses that reported a rise in the full earnings despite a difficult start to 2016. LVMH  (LVMUY) reported a 5% rise in revenue for 2016, to a record €37.6 billion, and operating profit increased 6% to €7 billion.

The luxury sector is expected to benefit in 2017, due to improved consumer sentiment in China and the U.S.

"In the medium term, despite growing economic, geopolitical and monetary uncertainties around the world, the Group confirms an ambitious target of growth rate for revenue at constant exchange rates," Hermes said Wednesday.