UPDATE 2-Hermes Q1 sales get lift from bags, currencies

Thu May 7, 2009 4:47am EDT

Related Topics

* Q1 sales up 3.2 percent to 428 million euros

* Sales trend in line with stable FY sales forecast

(Adds details, currency impact, background)

By Astrid Wendlandt

PARIS, May 7 (Reuters) - Hermes (HRMS.PA) proved again it was resisting the crisis better than many of its rivals with a 3.2 percent rise in first-quarter sales, helped by exchange rates and resilient demand for its handbags.

The world's second-largest luxury group by market value posted revenue of 428 million euros ($570 million) on Thursday, roughly in line with a mean forecast of 430 million euros in a Reuters poll of analysts.

Hermes, known for its elegant silk scarves and leather handbags starting at 1,500 euros, said trading in the first quarter was in line with its target of flat full-year revenue.

The luxury group, whose women's apparel is designed by fashion icon Jean-Paul Gaultier, benefits from a steady flow of orders for its handbags and other leather goods, which are larger than the company's capacity to produce them.

In some parts of the world, such as Asia, waiting periods for some handbags can be as long as three years.

Hermes' leather goods were the only products to see any sales growth during the first quarter.

Revenue from that area rose 10.2 percent at constant exchange rates and 21.7 percent at current rates.

Overall, Hermes saw revenue drop 4.7 percent at constant exchange rates.

In comparison, larger competitor LVMH (LVMH.PA) had a 7 percent drop in like-for-like first-quarter revenues at constant exchange rates. [ID:nLM938857].

Several brokers, including Oddo, said Hermes's underlying revenue drop was much steeper than the 1 percent decline they had expected.

WATCHES, TABLEWARE DOWN

Hermes said: "By sector, sales growth was driven by silk scarves, fashion accessories and the leather goods & saddlery division, with persistently brisk demand for leather bags."

Hermes said that in the other sectors sales receded, with a more pronounced downturn in perfumes, watches and tableware, where wholesale turnover was affected by distributors cutting down their inventories."

Hermes watch sales dived 35.7 percent at constant exchange rates while perfume sales fell 30 percent on the same basis.

LVMH's fashion and leather goods sales rose 4 percent during the first quarter at constant exchange rates, and watches and jewellery revenues slid 41 percent.

PPR's (PRTP.PA) Gucci Group saw a 3.4 percent drop in like-for-like revenues during the period, while leather goods sales were up only a modest 2 percent. [ID:nLL145118]

Hermes said currency trends, especially the appreciation of the Japanese yen and U.S. dollar against the euro, pushed up revenues by 33 million euros.

The company said it planned to continue to invest "significantly" in the expansion of its distribution network and would open or renovate more than 20 stores in 2009, mainly in Asia and the United States.

In the first three months of 2009, it opened two new branches, in Korea and the U.S., and took over a concession in Japan.

Hermes shares have gained 4 percent since the beginning of the year, outperforming the French CAC 40 index of blue chips up 3 percent. By 0720 GMT, the stock was up 1.12 percent at 104 euros. ($1=.7510 Euro) (Editing by David Holmes and Karen Foster)

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