Hermès sees sharp rise in sales

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Hermès, the Birkin bags and silk scarves group, said profitability hit a record high last year after a 23 per cent jump in sales, driven by strong demand in Asia and a rebound in the Americas.

The Paris-based group reported better than expected fourth-quarter sales, prompting upgrades to full-year earnings by some analysts.

Hermès was relatively tight-lipped on prospects for 2013, saying that it would expand distribution and strengthen its production capacity; its Kelly and Birkin bags have a waiting list of one year or more.

Hermès’ buoyant sales figures – total sales for the year were €3.5bn, a rise of 16 per cent at constant exchange rates – follow mixed reporting by other luxury goods groups.

LVMH, which is Hermès’ largest shareholder, with a 22 per cent stake, last month reported sales up 5 per cent in its core fashion and leather goods division at constant rates and on a like-for-like basis.

Richemont, the Swiss luxury goods group, said sales growth in Asia had stalled during the past three months of 2012, while the UK’s Burberry reported a pick-up in Chinese demand after falling sales in the country led to a profits warning in September.

Melanie Flouquet, analyst at JPMorgan, said that the “high desirability” of Hermès products meant it “does tend to outperform significantly operationally, in particular in periods of deceleration”.

The family-controlled group next month will report its 2012 profits but said on Tuesday in releasing the sales figures that “given the excellent performance in the fourth quarter, the operating margin is expected to be slightly above the all-time high achieved in 2011”.

This reached 31.2 per cent in 2011 – analysts had expected a lower operating profit margin of 30.5 per cent in 2012.

Thomas Mesmin, analyst at Cheuvreux said Hermès had ended on “a perfect note” after “a very strong and surprising performance” in the fourth quarter in Japan – its biggest market by sales after France.

Hermès shares – which have a very limited free float of about 3 per cent – rose 1.5 per cent to €248.55, while shares in L’Oréal rose by 4 per cent to €111.90. This followed a better than expected 17.6 per cent rise in 2012 net profit, reported after the Paris market close on Monday and the announcement of a €500m share buyback.

Jean-Paul Agon, L’Oréal chairman and chief executive, told journalists on Tuesday that “everything is possible” after being asked whether the group – which has net cash of €1.6bn – might eventually buy Nestlé’s 30 per cent stake in the world’s largest cosmetics company by sales.

The mutual lock-up agreement between the Swiss food company and the Bettencourt family, which owns 31 per cent of L’Oréal, expires in 2014.

“Having a war chest is a good thing in today’s world,” said Mr Agon, adding that “if tomorrow a big and strategic acquisition were to come up, we would have the means to achieve it”.

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