Hermes said sales growth accelerated in the first quarter, beating expectations, as more Asian and American shoppers bought its Constance and Lindy bags, adding to evidence of a recovery in the luxury goods industry. The French luxury goods group, also known for its $10,000 Birkin bags and $400 printed silk scarves, joined larger rivals LVMH and Kering – the latter of which owns Gucci and Yves Saint Laurent – in reporting strong quarterly sales.
Chief Executive Axel Dumas said that while all regions achieved good growth, Asia did "particularly well" thanks to stronger demand in mainland China. The U.S. business also performed strongly. Hermes struck a cautious note over its outlook, saying that the growth seen at the end of March would not necessarily continue over the full year.
It reported an 11.2 percent rise in revenue at constant exchange rates to 1.352 billion euros ($1.47 billion) compared with 6.6 percent growth in the last quarter of 2016. This was above analysts' expectations of 8.8 percent growth.
The first quarter increase was led by a 15 percent jump in sales at its leather goods division, which makes up half of group sales, and by a 16 percent rise in Asian sales. Echoing its peers, Hermes said the improvement was driven by most regions and by a pickup in demand from Asian customers, notably Chinese, both locally and abroad.
"In China, there is an acceleration with a growing appetite for consumption following a government stimulus package launched in 2016," Dumas told a conference call with journalists. "Hong Kong and Macau are also back to a positive momentum. Overall the dynamism of mainland China drives the whole region." The luxury industry has suffered in the past couple of years as demand in China slowed and attacks in France deterred some tourists from travelling to Europe.
Asked about news this week that the family of French billionaire Bernard Arnault plans to sell its Hermes shares as part of a move to simplify its business interests, Dumas said: "The impact will eventually be favorable on the liquidity of the Hermes shares." Arnault's family company is offering to pay for the buyout of minority shareholders in the Dior holding company partly with shares in Hermes, it which it still has an 8 percent stake.
(Editing by Sudip Kar-Gupta, Andrew Callus and Adrian Croft)