UPDATE 1-Hermes forecasts drop in full-year margin on forex

Fri Aug 29, 2014 2:07am EDT

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PARIS Aug 29 (Reuters) - French luxury goods maker Hermes said on Friday that foreign exchange rates hit profitability and would lead to a drop in its operating margin this year.

The company known for its Kelly leather bags and printed silk scarves posted a decline in operating margin in the first half to 32.6 percent from 33.1 percent a year ago and said its full-year margin would be below the 32.4 percent level in 2013.

Last month, Hermes reported a worse-than-expected sequential slowdown in second-quarter sales growth of 5.8 percent against 10.1 percent in the first quarter, hit by a slump in Japanese demand.

First-half operating profit was 621 million euros ($818 million), up from 584 million in the year-earlier period.

Net cash, which has been rising steadily in recent years, amounted to 946 million euros as of June 30.

Hermes reiterated its mid-term objective of revenue growth at constant rates of around 10 percent. (1 US dollar = 0.7590 euro) (Reporting by Astrid Wendlandt; Editing by James Regan)

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