Photographer: Balint Porneczi/Bloomberg

Tourists in U.K., Italy Boost Hermes as Luxury Goods Rebound

  • Weak pound, terrorism in France send tourists to London, Rome
  • Results follow signals of improvement from Tiffany, Kering

Terrorist attacks in France and the decline of the pound are drawing tourists to London and Rome, bolstering French handbag maker Hermes International SCA as it bounces back from weakness in the domestic market and China.

Hermes reported a 10 percent increase in full-year profit Wednesday, citing a lift in sales from the pound’s fall in the wake of the U.K.’s vote to leave the European Union and the renovation of the company’s Bocca di Leone store in Italy’s capital.

“The resumption of Chinese tourism to Europe is still not back to previous levels, and many are favoring visits to the U.K. and Italy at the detriment of France,” Chief Executive Officer Axel Dumas said on a conference call.

The maker of leather bags and silk scarves has joined other luxury-goods providers in reporting signs of a turnaround after several years of ebbing demand in China and a slowdown in travel to Europe. Tiffany & Co. posted higher-than-expected earnings last week, helped by new stores in Asia and higher-priced jewelry. Revenue at Gucci owner Kering SA rose at the fastest rate in four years. Hermes reiterated its forecast for “ambitious” sales growth in the medium term.

The company has seen “great dynamism” in Chinese purchasing of feminine products, which helped the company weather an industry-wide slump after a government anti-corruption drive.

Operating profit climbed to 1.7 billion euros ($1.8 billion) on an adjusted basis, the Paris-based company said Wednesday in a statement, in line with the average analyst estimate. The profit margin widened to a record 32.6 percent of sales from 31.8 percent in 2015.

Hermes shares fell 0.7 percent in morning trading in Paris as analysts at Berenberg cited the lack of a special dividend. The stock has risen 37 percent in the past year, outpacing the 12 percent increase in a Bloomberg Intelligence index of luxury-goods stocks.

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