* Q1 sales rise 17.6 pct at constant exchange rates
* Hermes gives no specific earnings forecast
* No slowdown in China, April growth steady
* Europe excluding France up 27 percent
* Non Japan Asia sales rise 22 percent
By Nina Sovich
PARIS, May 3 Hermes first-quarter
sales grew strongly as Chinese buyers flocked to stores in both
Europe and Asia, yet the French luxury goods firm warned that
the weak European economy could drag down growth in 2012.
The slowdown was not yet evident in the April figures, Chief
Executive Patrick Thomas said, noting that the month was broadly
in line with the beginning of the year, but the turmoil of
Europe would likely soon take a toll.
"It is going to be a very difficult year," he said in an
interview with Reuters. "The beginning was easy ... but the
trend is not good."
Hermes sales for the quarter grew 17.6 percent, excluding
currency fluctuations. Yet Hermes kept a cautious target of
roughly 11 percent growth for 2012 and noted that operating
margins might be hit by commodity prices.
European sales for the quarter were strong, up some 27
percent in organic terms, stripping out France where growth was
weaker due to supply problems. Thomas attributed European growth
to brand loyalty and Asian tourism.
The Asia Pacific region also drove growth, with sales up 22
percent, excluding Japan. Thomas said he saw no slowdown in
demand for goods in China, a market which is closely tied to the
health of the luxury goods industry.
Rival luxury company LVMH's stock fell slightly in
April when it intimated that demand in China was weakening for
items like Louis Vuitton bags and Dior perfumes.
Strong sales of PPR's luxury division Gucci helped
allay some of those concerns when the company reported that
sales in China remained strong.
Like most European luxury companies, Hermes has experienced
a boom as status-driven shoppers immune to the global credit
crisis snap up hundred thousand-euro snakeskin jackets and hyper
expensive leather and wooden furniture pieces.
The 175-year-old company, which has eye-popping profit
margins but downplays its commercial intent in favour of its
artisanal history, has been careful to limit store openings and
maintain an aura of exclusivity.
For ordinary customers, there can be a five-year wait for
the Birkin bag and Hermes has benefitted from the relative
difficulty counterfeiters have of imitating the handmade bags.
In large part the company's image and baseline revenues are
still driven by its oldest division, leather goods and saddlery,
which accounted for slightly less than half of sales in the
quarter, and posted 13.5 percent growth.
But it was the newer units that showed unexpectedly strong
sales. Jewellery and the homeware line dubbed "Art of Living"
saw sales grow 46 percent.
Watches and tableware also had a strong quarter, as did the
ready-to-wear fashion division.
Hermes's success has attracted the attention of larger
luxury goods company LVMH, which also reported strong sales
growth for the quarter. Against the wishes of Hermes'
management, LVMH has taken a 22 percent stake in it.
Takeover rumours and consistently strong performance have
turned Hermes into one of the most expensive stocks in Europe.
It currently trades at 47 times earnings, while European
averages hover around a ratio of 11.