HERMES POSTS STRONG SALES GAINS, YET GROWTH COOLS AS DOLLAR STRENGTHENS


Posted by Leonard Steinberg on April 22nd, 2013

Uber-luxury goods conglomerate Hermes posted its slowest pace of quarterly growth since 2009 as currency headwinds weighed on revenues, reporting a 10% rise in sales to 856.8 million euros. Last year, growth for a number of high-end names cooled as shoppers, notably in China, moved away from more mass market luxury products and splashed out on pricier, more exclusive goods.  Sameness on the very high end is a growing problem for a market seeking ultra-exclusivity in a world where the volume of extreme wealth is spreading. This trend seems to be replicating itself in New York real estate where the very high end is performing better than anything and the demand for ultra-ultra luxury remains very strong.

Hermes has been hit in recent months by unfavorable currency effects after receiving a boost from a weaker euro last year. LVMH Moet Hennessy Louis Vuitton Chief Executive Bernard Arnault raised a red flag earlier this year warning that “currency wars and competitive devaluation” could pose a risk. LVMH, which does more than 70% of its business outside of Europe, saw currency variations trim underlying sales’ growth in the first quarter, according to numbers released last week.

At constant currencies Hermes revenue climbed 13%, marking a slightly less stellar pace than in recent quarters though the figure is above the company’s medium-term target for annual sales growth of 10%, excluding exchange rate effects. Sales through the group’s own stores expanded briskly, rising 14% at constant exchange rates. Revenues from wholesale channels delivered “satisfactory” 10% growth, the company said.

Last week, U.K.-based Burberry showed signs of renewed health after a difficult 2012, as it said demand for higher-priced trench coats and leather bags had supported sales in recent months while LVMH reiterated plans to nudge its products further upmarket after it reported a 0.4% increase in sales at its fashion & leather goods division, home to its signature Louis Vuitton brand.