Hermes Lifts 2013 Revenue Goal on ‘Remarkable’ Fashion Sales

Hermes International SCA, the French maker of Kelly bags and silk scarves, raised its full-year sales target after a “remarkable performance” by its fashion unit.

Annual revenue growth could exceed 11 percent at constant exchange rates, Paris-based Hermes said today in a statement, adjusting an earlier forecast of more than 10 percent growth.

A 19 percent gain in third-quarter fashion sales, excluding currency shifts, propelled a 13 percent increase for the group, Hermes said. Total sales in the period rose 5.5 percent, missing estimates, as growth was affected by the weakness of the Japanese yen against the euro, the company said.

“All in all, good results,” said Mario Ortelli, an analyst at Sanford C. Bernstein. “If the company makes such a guidance means they are confident about the market environment and the strength of the Hermes brand.”

Hermes is benefiting as Chinese consumers adopt a more elitist approach to luxury goods, co-Chief Executive Officer Axel Dumas told L’Opinion newspaper this week. That contrasts with rivals including Kering SA-owned Gucci and Louis Vuitton, the world’s largest luxury brand, that have reported slowing sales amid efforts to reposition themselves as more exclusive.

Hermes fell 0.3 percent to 253.35 euros today in Paris, paring this year’s gain to 12 percent. LVMH Moet Hennessy Louis Vuitton SA owns 23.1 percent of the shares.

Slower Growth

The 19 percent gain in clothing and accessories sales in the quarter was slower than the first-half’s 21 percent advance. Sales of handbags and other leather goods rose 8.4 percent, also weakening slightly from the first-half’s 10 percent increase.

“This seems to be further evidence that the luxury demand environment in the third quarter was softer,” said Luca Solca, an analyst at Exane BNP Paribas in London. “All companies that have reported so far have shown sequential deceleration versus the first half. Hermes joins this group.”

Demand may accelerate in the fourth quarter, Solca said.

Total third-quarter revenue was 895.5 million euros ($1.21 billion), compared with the 908 million-euro median of nine analysts’ estimates compiled by Bloomberg.

Hermes repeated previous guidance that the full-year operating margin could be close to the record 32.1 percent of 2012, depending on currency fluctuations.

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