Exchange rates and Japan sales hit Hermes

France
Published:  21 July, 2014

French luxury goods firm Hermes posted a slowdown in second quarter sales growth, hit by a slowdown in Japanese demand and adverse changes in foreign exchange rates.

Revenue growth at Hermes, known for its classic leather bags, saddlery and printed silk scarves, slid to 5.8% from 10.1% in the first quarter.

Sales growth in Japan, one of its biggest markets, slowed dramatically to just 1.6% from 21.7% in the previous quarter when trading was boosted by price increases and advanced purchases ahead of a VAT rise on April 1.

Nonetheless, Hermes Chief Executive Axel Dumas said he expected overall sales growth at constant currencies in Japan to reach 7% this year against 6.5% last year, and that it would continue to be steady after the anomaly of the first quarter comparisons.

In America, where business has been particularly buoyant in recent years, revenue growth slowed down to 7.9% from 17.9% in first quarter but Dumas said the slowdown was mainly due to a high comparative basis.

Dumas said Hermes second-quarter sales in mainland China reached 16% at constant exchange rates.

Hermes said its leather goods division benefited from a ramp-up in production at new sites but sales growth from that unit stood at 13% overall in the first half, down from 15.5% in the previous three months.

The company flagged that its first-half operating margin, to be reported next month, would be slightly lower than a year earlier but close to the historical high of 32.4% reached over the full year in 2013.

Overall, second-quarter revenue reached €963.4 million ($1.3 billion) in the quarter to June 30, up from €943.5 million in the previous three months.

The year-on-year rise at constant currencies was 9.6%, against 14.7% in the previous quarter.

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