UPDATE 2-Hermes Q1 sales ride luxury resurgence

Wed May 11, 2011 6:16pm IST

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* Overall sales up 25.5 percent

* Growth rate tops rivals

* Japan sales flat, Americas sales jump a third

* Full-year sales growth forecast confirmed

* Shares jump 7.6 pct to 6 1/2 month high

(Adds CEO and analyst comments, updates shares)

By Astrid Wendlandt and Christian Plumb

PARIS, May 11 (Reuters) - Hermes (HRMS.PA) lifted sales by a quarter on soaring demand for watches, silk scarves and fashion accessories, topping three-month growth at European rivals in the resurgent luxury goods market.

The share jumped as much as 7.6 percent to a 6 1/2-month high as investors anticipated an earnings upgrade following a restrained outlook from the purveyor of silk handkerchiefs and 10,000-euro crocodile leather handbags.

The group, enjoying a rebound in the United States and strong demand in France and Asia, benefited from solid appetite for discreet and conservative luxury items and said April trends were in line with the first quarter.

But Chief Executive Patrick Thomas kept the 2011 sales growth target at 8-10 percent.

"I prefer to remain prudent," Thomas told Reuters in an interview.

Hermes first quarter sales growth - 21 percent at constant currencies - compared with 14 percent at LVMH and 22.1 percent at the luxury division of PPR (PRTP.PA).

Sales hit 637 million euros ($890 million), compared with a forecast for 583 million, helped by new collections in silks and textiles.

"It's worth noting that this is the latest of several consecutive quarters in which the silks and textiles unit has exceeded expectations," CM-CIC Securities analyst Merav Atlani said in a research note.

Hermes' buoyant figures, combined with Bulgari's BULG.MI strong first-quarter sales published on Tuesday, helped lift European luxury goods stocks.

By 1222 GMT, Hermes stock was up 5.26 percent at 170.20 euros, with LVMH (LVMH.PA) ahead 2.6 percent, Richemont (CFR.VX) up 2.7 percent and Swatch (UHR.VX) 2.3 percent firmer.

"The numbers are impressive," a UBS analyst said, referring to Hermes, which is fighting off an advance by larger rival LVMH, which has built a 20 percent stake.

"The market believes the compay's growth target is much too conservative and there could be earnings upgrades in the works," said one Paris-based analyst. "Also the stock is not very liquid."

LUXURY SECTOR LIFTED

Hermes said sales gains were also strong in perfumes, where it introduced a new fragrance, helping propel a 33 percent rise at constant currencies.

On the same basis, watch sales rose 34 percent and silks and textiles, including the scarves which made the brand famous, jumped 26 percent.

Thomas warned that the operating margin, which reached 27.8 percent for 2010, could drop slightly this year due to high comparatives against last year.

"It will be in line with last year but there could be a slight decline," he said.

Hermes' European sales rose 21 percent, while sales in the Americas soared 33 percent. Asia, excluding Japan, rose 27 percent.

Sales in Japan were flat for the period, reflecting the earthquakes, tsunami and nuclear disaster that pummelled consumption in one of the world's top luxury goods markets.

(Additional reporting by Pascale Denis; Editing by David Cowell) ($1 = 0.7158 euro)

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