PARIS — Still trailing its luxury peers, Hermès International said Friday its third-quarter sales rose 3 percent to 351.3 million euros, or $446.9 million, a 6.2 percent bump at constant exchange rates.
Patrick Thomas, chief executive officer of Hermès International, characterized the figures as consistent with the firm’s full-year growth target of 7 to 7.5 percent.
He also noted that gains would have been close to 10 percent were it not for the elimination of a range of canvas bags that were considered a threat to Hermès’ upscale image.
Thomas also trumpeted robust growth in Europe, excluding France, where sales at constant currency jumped 12.6 percent in the quarter to 63.6 million euros, or $80.9 million. “Also, luxury has been going very well in the U.S.,” he added. The Americas logged a 7.5 percent organic sales increase to 55.1 million euros, or $70.1 million.
Gains were more modest in points East, with a 1.8 percent organic increase in Japan to 94 million euros, or $119.6 million, and a 3.1 percent rise in Asia to 156.7 million euros, or $199.3 million.
However, Thomas asserted that Hermès is outperforming its peers in Japan, where demand for European luxury goods is softening as spending shifts to other categories such as leisure.
Last month, Hermès expanded its 10-story flagship in Tokyo’s Ginza district to an adjacent building, adding 3,900 square feet of retail space and a cafe with furniture designed by Martin Szekely. Thomas said that was cause for “a little bit more optimism” in the market.
And last week, Hermès christened a new six-story building on Seoul’s prime luxury strip, boasting 9,700 square feet of retail space over two floors, a cafe, an equestrian library and an art gallery currently featuring works by French artist Daniel Buren.
By product category, sales of ready-to-wear and accessories slipped 0.4 percent at constant exchange in the third quarter to 74.9 million euros, or $95.3 million, while watches rose 2.5 percent to 25.2 million euros, or $32.1 million. Perfumes and tableware powered ahead, registering organic gains of 36.3 percent and 30.8 percent, respectively, for the three months ended Sept. 30.
Sales of bags and luggage, the category with the fattest margins, gained 4.1 percent in the quarter to 136.1 million euros, or $173.1 million.
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Analysts said the numbers were below expectations.
“Watches and ready-to-wear were also disappointing, implying that initial guidance of high-single-digit growth for both categories will be tough to reach,” HSBC analysts Antoine Belge and Erwan Rambourg wrote in a research note from Paris. “In 2006 and 2007, Hermès should once again underperform the industry, both in terms of top-line growth and EBIT margin evolution.”
Shares in Hermès International have been rising on speculation the company could be in play, but Thomas dismissed the rumors and said its shareholders remain loyal to the company.
“We continue to believe the company is not for sale,” Rodolph Ozun and Antoine Colonna wrote in a research note for Merrill Lynch, Paris. “Hermès confirmed…that none of its shareholders had disclosed a stake exceeding 0.5 percent of the capital….Family shareholders have not sold any shareholdings, either.”
Thomas noted that men’s rtw maintains strong momentum, but the women’s department has been marred by delivery problems in several categories, including belts, fashion jewelry and footwear. “This category for the moment is performing below its potential and we’re going to act on that next year,” he said.
Thomas returned from South Korea last week where the company inaugurated the Maison Hermès Dosan Park with gold balloons, confetti, singers and a party for 500 guests.
Designed by architect Rene Dumas, the Dosan Park is one of only four Hermès buildings, the others being in Tokyo, New York and Paris. The Seoul store’s double-layer glass facade is composed of squares banded in golden stripes and, despite the building’s hulking cube shape, it shelters a tree-filled central atrium. Hermès opened its first hotel-based shop in South Korea in 1985, establishing an affiliate, Hermès Korea, in 1997, and an art prize, the Missulsang, in 2000. Today, the French luxury firm counts six boutiques in South Korea and eight corners.
The building, near one of the city’s few parks, also houses the headquarters for Hermès Korea, a press office and showrooms, as well as underground parking and stockrooms.
Share in Hermès International fell 4.7 percent Friday to close at 84.7 euros, or $107.75, on the Paris Bourse.