Hermes Lifts 2010 Operating Margin Growth Forecast to About Three Points
Hermes International SCA, the French maker of Kelly handbags, raised its outlook for operating margin growth after fourth-quarter sales beat analysts’ estimates and helped the company surpass its 2010 revenue forecast.
The full-year operating margin will widen by about 3 percentage points, Paris-based Hermes said today in a statement, lifting a previous forecast for an increase of 1 to 2 points. Pretax profit will rise by slightly more than 40 percent, the maker of leather bags and silk scarves said.
Sales for the three months ended Dec. 31 climbed 25 percent to 736 million euros ($1.02 billion), from 587.3 million euros, Hermes said. The average estimate of eight analysts compiled by Bloomberg was 709.4 million euros. Excluding currency moves, full-year revenue advanced 19 percent to 2.4 billion euros, beating a November forecast of about 15 percent growth.
Hermes follows Bulgari SpA, Burberry Group Plc, Cie. Financiere Richemont SA and Tod’s SpA in reporting a double- digit sales increase in the last three months of 2010, suggesting wealthy consumers are regaining confidence. Luxury demand may rise by 11 percent in 2011, according to HSBC.
“Hermes has been one of the best top-line performers in the luxury industry and we expect this to continue in 2011 and 2012,” Antoine Belge, an analyst at HSBC, wrote in a report last month.
Hermes will pay a dividend of 1 euro a share on Feb. 10 and plans to open 10 stores this year, the company said. Net cash was 830 million euros as of Dec. 31, Hermes said.
Share Performance
Hermes has gained 54 percent in Paris trading in the past 12 months, valuing the company at 15.9 billion euros.
LVMH Moet Hennessy Louis Vuitton SA, the world’s largest luxury-goods maker, announced in October it held a 14.2 percent stake in Hermes and derivative instruments for another 2.9 percent that it has since exercised. LVMH, which now holds 20.2 percent of the Birkin bag maker, has said it doesn’t intend to seek a board seat or control.
The full-year sales increase was driven by “extremely strong business momentum” at the company’s own stores, particularly during the Christmas season, said Hermes, which opened 13 branches and renovated or enlarged nine others. U.S. sales growth was “brisk,” spurred by the first Hermes store for men on Madison Avenue in New York, the company said.
Fourth-quarter sales at Hermes’s stores advanced 28 percent, while wholesale revenue climbed 7.6 percent.
Sales of leather goods advanced 30 percent in the quarter, while revenue from silk ties and scarves climbed 25 percent and apparel and fashion accessories sales jumped 27 percent. Revenue from watches rose 13 percent, while tableware sales gained 23 percent. Perfume sales fell 3 percent.
Fourth-quarter revenue increased 18 percent in Europe, led by France, and 36 percent in the Americas, Hermes said. Sales jumped 17 percent in Japan and surged 45 percent in the rest of the Asia-Pacific region.
To contact the reporter on this story: Andrew Roberts in Paris at aroberts36@bloomberg.net.
To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net.
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