Hermes Sales Surge on Asian Demand, Beating Estimates

Hermes International SCA, the French maker of luxury handbags and silk ties, said first-quarter sales rose 19 percent, surpassing analysts’ estimates, on demand for leather goods in Asia.

Revenue increased to 507.7 million euros ($648 million) from 428.4 million euros a year earlier, the Paris-based company said today in a statement. The average estimate of eight analysts surveyed by Bloomberg was 464.8 million euros.

The luxury-goods industry is recovering from its worst slump on record as consumers spend more on designer apparel and accessories, and distributors increase orders. Last month, the fashion and leather-goods business of LVMH Moet Hennessy Louis Vuitton SA reported an 8 percent increase in first-quarter sales, excluding currency shifts, while Gucci Group NV, PPR SA’s luxury unit, had a 4.7 percent gain.

“It’s really stellar growth,” Claudia Lenz, an analyst at Bank Vontobel AG in Zurich, said in a telephone interview. Revenue gains in key divisions such as leather goods and in Asia, excluding Japan, are “really impressive,” said Lenz, who has a “reduce” recommendation on the stock.

Hermes rose as much as 1.53 euros, or 1.5 percent, to 100.70 euros in Paris and traded at 100.65 euros at 9:30 a.m. Hermes has declined 1.1 percent in the last 12 months, compared with a 46 percent gain by LVMH.

Shaky Growth

Hermes’s revenue growth, influenced by weak figures from 2009, was driven by “an end to destocking and a slight uptick in demand,” Dennis Weber, an analyst at Evolution Securities Ltd. in London, wrote in a report before the announcement. Gains in coming quarters are “likely to be more muted, mostly due to a tougher comparison and a less favorable geographic mix versus its peers.” Weber has a “sell” recommendation on the stock.

“First-quarter sales growth cannot be extrapolated to the full year owing to the more favorable basis of comparison with the same year-ago period and to persistent economic uncertainties,” Hermes said.

Chief Executive Officer Patrick Thomas said in March that he expects revenue to rise by at least 5 percent this year, buoyed by women’s ready-to-wear clothing.

Hermes will continue to expand its distribution network and plans to open or renovate about 20 stores by the end of the year, the company said today.

Kelly Bags

Sales jumped 45 percent in Asia outside Japan, where sales fell 4.6 percent, Hermes said. Revenue increased 15 percent in Europe and 20 percent in the Americas. Sales of leather goods such as Kelly bags, which cost at least 4,000 euros, increased 20 percent, while revenue from silk ties and scarves increased 15 percent and apparel sales climbed 17 percent.

Revenue jumped 36 percent for watches and 38 percent for perfumes. Sales of both product lines were hurt last year as third-party distributors ran down inventories. Tableware sales gained 22 percent.

Sales of Hermes apparel, accessories, fragrances and watches will probably recover this year, particularly in the company’s own stores, Thomas said in March. Leather items as a percentage of sales will fall to 45 percent, he said.

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