UPDATE 2-Japan helps Hermes' quarterly sales beat forecast

Tue Apr 29, 2014 5:51am EDT

* Q1 like-for-like sales up 14.7 percent

* Boosted by demand in Japan ahead of price rises, VAT hike

* Sales growth faster than close rivals (Adds details, CEO comments)

By Astrid Wendlandt

PARIS, April 29 (Reuters) - French luxury goods maker Hermes posted a forecast-beating 14.7 percent rise in like-for-like first-quarter sales on Tuesday, driven by strong demand for its fashion and leather goods.

The Paris-based company known for its Kelly and Birkin handbags said sales in Japan, one of its biggest markets, were boosted by purchases ahead of anticipated price increases and a value added tax hike on April 1.

Revenue in Japan rose 22 percent in the first quarter, while trading remained buoyant in the United States and China.

Hermes Chief Executive Axel Dumas said he expected sales in Japan to be lower in the second quarter due to the higher comparative basis, but remain positive over the whole year.

Dumas said trading had improved in some southern European markets such as Italy both thanks to higher demand from local consumers and also thanks to the brand's new shop in Milan opened in October last year.

"There is surely a recovery in Italy," Dumas told Reuters in an telephone interview.

Hermes' first-quarter revenue of 943.5 million euros ($1.31 billion) was hit by a negative foreign exchange impact of 40 million euros, the company said in a statement.

"A very impressive start to the year," broker UBS said in a note, adding that the company's first-quarter revenue figure overshot its 902 million euro forecast.

Hermes's performance beat again that of close rivals such as Louis Vuitton, owned by LVMH, whose sales rose 9 percent in the first quarter and Gucci, part of Kering which posted a revenue rise of just under 1 percent on a like-for-like basis.

Leather goods products, Hermes' main revenue and profit contributor, generated sales growth of 15.5 percent on a like-for-like basis, while ready-to-wear and fashion accessories sales rose 19.1 percent.

Dumas said the increase was helped by ramped-up production at the company's newly opened sites in France.

"As demand is always higher than supply, variations are therefore always linked to supply," Dumas said.

Last month, the company said it expected a slight drop in operating margin in 2014, partly due to foreign exchange variations.

At 0950 GMT, Hermes shares were up 0.5 percent.

($1 = 0.7223 Euros) (Editing by James Regan and Mark Potter)

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