Hermes a Big Winner in China

Hermes a Big Winner in China

Global trade tensions may have sapped growth for many firms, but luxury handbag maker Hermes said Tuesday it posted a double-digit rise in second quarter sales thanks in part to China.

For the months of April through June the firm recorded a 14.7 percent increase in sales to 1.67 billion euros ($1.87 billion), beating the consensus of analyst forecasts compiled by both Factset and Bloomberg.

Over the first half of the year sales rose by 15.1 percent to 3.28 billion euros.

“Hermes sales were very dynamic in the first half of 2019, in all regions and in all business lines,” said chief executive Axel Dumas.

Asia excluding Japan led the growth among regions, where sales jumped by 18.6 percent in the second quarter when exchange rates changes are excluded, “with positive momentum in continental China and double-digit growth in all other countries in the area,” Hermes said in a statement.

Financial Director Eric du Halgouet acknowledged that sales in Hong Kong were impacted by the pro-democracy demonstrations in June, with two of its six shops there having to make brief closures. However he noted that sales growth there was still in the double digits for the half year.

Sales rose by nearly 10 percent in Japan and the Americas as well.

Jewellery and home products enjoyed the best second quarter growth of nearly 21 percent, although it makes up less than 8 percent of total sales.

The main business line that includes handbags rose by 12.2 percent, while the ready-to-wear and fashion accessories unit rose by 16.9 percent.

“In the medium term, despite growing economic, geopolitical and monetary uncertainties around the world, the Group confirms an ambitious goal for revenue growth at constant exchange rates,” said Hermes.

It has previously indicated that its operating margin will likely come in at slightly less than the record 34.5 percent it recorded in the first half of 2018 when it publishes half year results in September.

Hermes shares slid 0.4 percent in Paris where the CAC 40 index was up 0.4 percent.

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S. Jack Heffernan Ph.D. Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

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