Hermès Sees No Slowdown in Chinese Sales | News & Analysis

Luxury consigner Rebag’s store in Soho. Photo: Paul De Luna.

PARIS, France — Hermès has reported strong third quarter sales momentum, with its leather goods division performing well, and the maker of deluxe Birkin handbags also played down fears of a slowdown in China.

Luxury goods companies have become the subject of investor fears over a potential spending slowdown among Chinese customers (who account for a third of industry sales) as a trade war with the United States simmers on.

Hermès joined rivals including Gucci owner Kering in striking an upbeat tone on China, however, saying such worries were groundless for now.

“We don’t see any change of pace at this stage,” chief executive Axel Dumas told journalists, adding that the company “read a lot” about concerns regarding Chinese consumers and had discussed it internally.

“We don’t understand exactly why we’re talking about it.”

Demand from Chinese tourists who splurged on luxury goods overseas was also solid, though that client segment is more vulnerable to currency fluctuations, Dumas said.

The company’s revenue came in at €1.46 billion ($1.67 billion) in the July to September period, rising 9.7 percent from a year ago at constant currencies.

This marked a slowdown from the 11.6 percent comparable growth from a quarter earlier, due in part to a weaker performance in Hermès’ silk scarves division after a tough year-ago comparison.

But revenues were a touch ahead of analysts’ expectations as sales picked up pace in the division that houses handbags and items such as saddles.

“Another solid quarter from Hermès with a particularly reassuring performance in the most profitable leather division,” RBC Capital Markets analyst Rogerio Fujimori said in a note.

Hermes shares have lost over 17 percent of their value since a peak at the end of June, though they are still are up almost 15 percent so far this year.

Like rivals including LVMH’s Louis Vuitton and Gucci, Hermès has been among the big beneficiaries of a favourable industry backdrop over the past three years.

It has long cultivated a following for its exclusive Birkin and Kelly leather handbags that can cost well over $10,000 and also pushed into online sales with more intermediate products. It launched e-commerce operations in China in October.

By Sarah White and Pascale Denis; editor: Keith Weir


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