Hermès bags better than expected results

Hermès, the French luxury goods maker, reported strong sales during the first three months of the year, outperforming market expectations and outshining rivals.

First-quarter sales at the Paris-based, family-controlled group increased to €943.5m, 14.7 per cent higher at constant exchange rates than the same period a year ago, and 10.1 per cent higher on a reported basis.

In a research note UBS said the figures were “a very impressive start to the year”.

The group, which makes the Birkin and Kelly leather bags, saw sales during the period leap 21.7 per cent at constant exchange rates in Japan, one of its biggest markets, as customers rushed to buy merchandise before announced price rises and a value added tax increase at the start of April.

But sales in the rest of Asia were also strong, growing 17.7 per cent at constant exchange rates – and 12.8 per cent on a reported basis.

The fortunes of Hermès in China have differed sharply from those of other luxury groups, many of which have seen once-vigorous sales growth tail off since the government crackdown on lavish spending by state officials.

Analysts say that the group’s still-buoyant sales are a reflection of the fact that production capacity, rather than demand, has tended to dictate the pace of sales.

Hermès has been adding capacity in France in recent years, in particular at its leather goods and saddlery division, which accounts for more than 40 per cent of group sales.

The company said that sales of leather goods during the first three months of this year reached €409.9m, an increase of 15.5 per cent in constant currency terms compared with the same period of 2013.

The most dynamic division was ready-to-wear and fashion accessories, which grew 19.1 per cent at constant exchange rates to €214.6m

Luxury Retail

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