February 26, 2020 / 8:48 AM / 3 months ago

Birkin bag maker Hermes starting to see return to normal in China

French luxury goods brand Hermes logo is seen on a tie displayed during the "Hermes hors les murs" (Hermes outdoors) event in Paris, France, November 18, 2016. REUTERS/Christian Hartmann/Files

MILAN (Reuters) - Birkin handbag maker Hermes (HRMS.PA) said on Wednesday it was starting to see a return to normality in China, with just four of its 43 stores on the mainland and areas like Hong Kong and Macau still closed due to the coronavirus outbreak.

Luxury goods companies such as Hermes are facing a sales hit from the outbreak as they have had to shutter shops and shelve advertising campaigns in the world’s second-largest economy, while fewer Chinese tourists have been travelling both at home and abroad.

Chinese shoppers account for a third of the luxury goods industry’s clientele.

“Until 10 days ago we were in a situation of closing stores, now we are in a situation of re-opening them,” Hermes Chief Executive Axel Dumas told reporters, adding that it was too early to estimate the impact of the health crisis on its group.

He said that at one stage Hermes had been forced to close 11 of its stores in greater China due to the emergency.

“We are seeing a potential return to normality in China,” he added. Around 80% of Hermes’ manufacturing capacity is based in France, so the company was not suffering from disruptions to its supply chain, Dumas said.

None of Hermes’ productions facilities in Italy, the European country with the biggest number of coronavirus cases as the outbreak spreads beyond Asia, have been shut so far, he said.

The French firm, also known for its silk scarves, reported a slowdown in sales growth in the fourth quarter of 2019 to 1.87 billion euros ($2.03 billion), hit, along with rivals, by protests in Hong Kong and the impact of a sales tax increase in Japan.

That was up 10.7% at constant exchange rates, broadly in line with analyst expectations, and compared with sales growth of 15% in the third quarter.

Reporting by Silvia Aloisi, Editing by Sarah White and Louise Heavens

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