February 8, 2018 / 9:00 AM / 2 months ago

UPDATE 1-Luxury group Hermes stays upbeat on margins although Q4 sales growth eases

* Sales at constant FX grew 4.6 pct in Q4 vs 11 pct in Q3

* Low stocks of leather goods at year-end due to demand

* Hermes upbeat on margins, to hit record for 2017

* Good momentum in luxury industry - CEO

* Shares dip, stock hit record high in 2017 (Recasts with outlook, adds comments)

By Sarah White

PARIS, Feb 8 (Reuters) - Hermes reported a slowdown in sales growth in the fourth quarter as stocks of its coveted handmade bags ran low, although the French luxury goods maker said margins likely hit a record last year and it remained upbeat for 2018.

Hermes, famed for its $10,000-plus handbags such as the Birkin and its squared silk scarves, is benefiting like peers including Louis Vuitton-owner LVMH from growing appetite from younger shoppers and a pick-up in Asian demand.

That backdrop should stretch into this year, Hermes said, even as the company deals with tougher year-ago comparisons - like in its silk division during the fourth quarter - and some negative currency effects.

“There is good momentum in our industry because of demographics and because of the economic growth of China and the worldwide economy,” Chief Executive Axel Dumas told journalists.

“We are confident for the future and it will continue I hope at this kind of pace,” he added.

Hermes’ sales at constant currencies rose 5 percent in the fourth quarter, a slight slowdown from the previous three months and a touch below forecasts. Analysts had expected growth to ease to closer to 6 percent from 11 percent a quarter earlier.

The company, which is expanding its leather goods production capacities through to 2020 with new workshops in France, said strong demand for its handbags had lead to low inventory levels at the end of 2017.

Hermes shares, which hit a record high of 468.30 euros in April 2017, dipped 0.3 percent to 430.90 euros in early session trading.

Hermes, due to report full results on March 21, said operating profitability should be close to the level recorded over the first half of last year, when it hit a record 34 percent.

Hermes - which also makes perfumes, clothing and watches - is trying to boost online sales, similar to its rival companies.

The label is overhauling its website, and is due to roll out the new version in Europe by the end of the first quarter and in China by year-end, Dumas said.

Hermes said it had long benefited from steady appetite in China but had noted improved demand in other parts of Asia, including Hong Kong, where it opened a new flagship store in January, and Macau.

Hermes’ sales reached 5.5 billion euros for 2017 as a whole, up 9 percent at constant currencies.

$1 = 0.8140 euros Reporting by Sarah White and Pascale Denis Editing by Sudip Kar-Gupta

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