The Malaysian Insider

PARIS, Nov 6 — Hermes is optimistic about Christmas after sales of its luxury goods continued to improve in October, the French company said today.

The maker of silk scarves and crocodile handbags published sales figures that showed yet again that it is one of only a few luxury good companies to see any growth during the crisis.

“We are optimistic about the end of the year and about Christmas,” Hermes Finance Director Mireille Maury told Reuters in an interview.

Hermes, known for its audacious designers, has enjoyed resilient demand during the crisis partly because shoppers consider its timeless style to be good value for money.

“The more the object looks legitimate, the less it will be affected by the crisis,” Hermes Chief Executive Patrick Thomas told BFM radio today.

Maury said wholesale trading, the worst hit by the spending downturn, climbed back, particularly in perfumes and watches.

However, revenue from the group’s own stores, which represent 80 per cent of turnover, rose strongly in Asia, Europe and the United States and overall were up 12 per cent at constant exchange rates during the third quarter.

Hermes said that if this trend continued, the group could exceed its target of flat revenue at constant exchange rates, but did not give a detailed forecast.

With a market capitalisation of US$15.3 billion (RM52.02 billion), Hermes is the world’s second largest luxury group in terms of market value measured in dollars behind LVMH, but it stands just marginally ahead of Switzerland’s Richemont, worth US$15.080 billion.

Hermes shares, which have fallen about 3 per cent since the beginning of the year, were up 2.4 per cent at €99.11 by 1120 GMT.

Buoyed by its resilience and recurring takeover speculation, the stock trades on more than two times the European luxury goods’ sector average for expected earnings this year.

The Paris-based company’s revenue was €452.1 million (Rm2.28 billion) in the three months to Sept 30, up 10.2 per cent on a reported basis and 4.8 per cent at constant exchange rates.

“It (Hermes’s sales performance) is above forecasts, particularly in leather goods,” said Aurelie Husson Dumoutier, analyst at Societe Generale.

Leather goods sales, which make up the bulk of business, jumped 25 per cent during the period and were up 17.2 per cent in like-for-like terms.

However, Hermes said weak currencies against the euro in the second half of the year forced it to forecast a 5 per cent drop in current operating profit for 2009.

Maury said profits made abroad would be hit when translated into euros and the bottom line would be also impacted by the group’s high investments in communications, kept at around 90-100 million euros for the year.

However, capital expenditures would total about €150 million for 2009, she said, down from an estimated €160 million at the half-year stage and €180 million in January.

Louis Vuitton and Hermes are among only a handful of fashion and leather goods brands to show some resistance to the luxury spending slump, the most severe in a decade.

Consultants Bain & Co. expect global luxury sales to fall 8 per cent this year, or 11 per cent at constant exchange rates, to €153 billion.

LMVH’s Louis Vuitton leather goods and fashion brand saw sales rise in “single digit terms” on a like-for-like basis during the third quarter while the group’s fashion and leather goods rose 5.3 per cent overall.

Comparatively, third-quarter sales at PPR’s Gucci Group, which includes fashion brands such as Yves Saint Laurent, fell 6.4 per cent and as much as 10 per cent on a like-for-like basis excluding the impact of foreign exchange. — Reuters