Hermes International sales up despite Paris attacks

French luxury handbag maker Hermes International reported full-year profit that beat analysts’ estimates even after the November terrorist attacks in Paris damped tourist spending in its home market.

Operating profit rose 19%, €1.54bn on an adjusted basis, the Paris-based company said yesterday in a statement. Analysts predicted €1.52bn, based on the average of 16 estimates.

The margin widened to 31.8%, after the company had warned profitability would be close to 2014’s 31.5% because of adverse currency shifts.

“In a world where there are a multitude of risks and uncertainties, the ability to be able to react and adapt according to events remains important,” chief executive officer Axel Dumas said on a call with reporters.

Fewer tourists are shopping in Europe, following the terror attacks last year in Paris — a situation that’s been aggravated by Tuesday’s bombings in Brussels, which killed at least 31 people.

Hermes said sales in France rose 6%, faring “remarkably well” despite the slowdown after the November 13 events in Paris.

The stock rose 1.8% to 317 at one stage yesterday. Luxury companies also face slowing demand in China, a slump in Hong Kong and Macau, and subdued consumption in the US.

Hermes is benefitting from two new productions sites in France, which are boosting its supply of handbags and other leather goods.

Earnings were also buoyed by sales in Japan, which has seen an influx of Chinese tourists.

Still, the company kept its guidance for 2016, saying growth could be below its medium-term goal of 8% expansion at constant exchange rates due to global economic and political risks.

The company plans to raise prices about 3.5% this year in Europe, in line with production costs, Mr Dumas said.

He said it was too early to give a margin forecast or comment on sales growth.

Hermes lowered its sales outlook for a second year in February, predicting currency-neutral growth at less than half the level of the start of this decade. The company’s fourth-quarter revenue increase was the weakest in six years.

Hermes also said it plans to pay a dividend at 3.35 euros a share.

The luxury market will expand about 2% in 2016, according to MainFirst Bank.

The maker of €4,200 saddles is targeting revenue of €6bn by 2020.