Hermès Sales Growth Accelerate Thanks to Japan

French luxury goods maker Hermes has reported a 22% increase in sales in the second quarter, to €1.177 billion, in line with the expert forecasts. This figure is three percentage points higher than in the previous quarter. The company has been able to compensate for the slowdown in sales in China and Hong Kong with a dramatic improvement in Japan. The company warned that its operating margin will decline «slightly» (it did not specify more, but a few months ago it talked about half a percentage point) by the effect of the euro weakness, which increases some costs.

In Japan sales grew 27% (10 percentage points above forecasts) thanks to the favorable comparison with last year -when a tax increase caused a slump in sales– and because the company has not compensated through prices the weaker yen. In any case, Hermès is one of the European luxury companies less exposed to China and Hong Kong, with only seven open stores.

Much of the sales improvement was due to the currency effect (mainly the weakness of the euro against other currencies). Disregarding this effect, revenues would have grown slightly less than half, around 10%. In any case, this figure is still very positive and exceeded market expectations. And in any case, Hermès reiterated its mid-term target of a revenue growth of 8% regardless of the currency effect.

By business areas, just highlight the success of the leather goods division, with sales growth of 15%, as well as watches, which reached an increase of the business for the first time in one and half year.

The stock market has received these results with moderate gains, at around 1%, because they were partially discounted but especially for the poor liquidity of the stock. In any case, its market value is just at 5% of their record high after rising more than 30% in the last twelve months, reaching a market capitalization of over €36 billion.

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