Hermes taps China demand to reach €1.26bn revenue

Recovery in luxury-goods industry gained pace after handbag maker Hermes International joined LVMH and Gucci parent Kering in saying the Chinese market is improving and pointed to growth in leather goods like its iconic Birkin bag.

Revenue climbed to €1.26bn, said Paris-based Hermes yesterday. Sales climbed 8.8% excluding currency swings, led by 14% growth in Asia Pacific, the fastest rate in more than two years.

The shares rose as much as 2.4% in Paris.

Sales of leather goods rose 16%, buoyed by €8,000 Constance purses and €4,500 Halzan shoulder bags.

The maker of silk scarves joins rivals LVMH and Kering in reporting better-than-expected results, giving the luxury industry some relief ahead of the Christmas season.

Others, like Britain’s Burberry Group, are still grappling with ebbing demand in key luxury hubs like Hong Kong.

Some observers argue that its success is a double-edged sword because part of the outperformance was due to its strategy to manage a difficult environment by raising handbag production.

“China is growing at a better pace, mainly because the economy is strengthening and because of domestic consumption,”CEO Axel Dumas said on a call with reporters.

“In our case, I’m not talking about a rebound, because we always had growth,” Mr Dumas said.

After sales growth of 7.7% in the first nine months of the year, Hermes maintained its full-year forecast for growth of “slightly” below 8%.

Hermes remains cautious as the Christmas season approaches, Nr Dumas said.

“Management has always guided conservatively — under-promise and over- deliver,” Rogerio Fujimori, an analyst at RBC Capital, wrote in a note to clients.

Improvement in the Asian market and easier comparisons in France may buoy Hermes’s sales, he wrote.

Revenue in France dropped 0.9%, while analysts had expected a 3% gain.

Demand slumped in the fourth quarter last year in that market after the November 13 terror attacks in Paris.