French luxury goods maker Hermès on Wednesday said it would no longer provide an annual sales growth forecast starting next year due to the increasingly uncertain trading environment. "In light of the current economic and currency uncertainty, we no longer wish to provide a written guidance," Chief Executive Axel Dumas told journalists on a conference call, adding Hermes continued to aim to outperform the market.
Hermès, which was the only major European luxury brand to provide a quantified sales growth outlook, said it was maintaining its guidance for 2016 as it reported a 13 percent rise in net profit to 545 million euros ($611.60 million).
"Hermes is trading on a price-to-earnings ratio of 33.7 times next year's earnings, virtually double that of LVMH. This can only be sustained if Hermès can continue to produce materially faster growth than the sector," said Luca Solca, luxury goods analyst at Exane BNP Paribas.
"Abandoning the 8 percent guidance is a first sign that it probably can't and that it's growth will normalize."
When Hermès published its first-half sales in July, it said full-year like-for-like sales growth could be below its medium-term revenue growth target of 8 percent, which it lowered from 10 percent two years ago. Dumas said Hermes' trading at its shops in Nice, Cannes and Paris had suffered from the terrorist attack in Nice on July 14 and had still not recovered since.
The luxury house's first-half operating margin reached a record high 33.9 percent, up from 32.5 percent last year, which it said was boosted by favorable foreign exchange hedging contracts. For the full year, Hermès kept its target of operating margin slightly higher than 2015's 31.8 percent.
(Reporting by Astrid Wendlandt; editing by Matthias Blamont and Jason Neely)