February 5, 2010 / 7:12 AM / 8 years ago

UPDATE 2-Hermes leads luxury pack with strong Christmas sales

* Hermes 2009 sales up 4.1 pct at constant currencies

* Q4 sales up 11 pct, constant currencies; 8.5 pct reported

* LVMH Q4 sales up 1 pct like-for-like

(Adds comments by finance director, analyst; share prices)

By Astrid Wendlandt

PARIS, Feb 5 (Reuters) - Hermes (HRMS.PA) on Friday joined the ranks of rival luxury groups including LVMH (LVMH.PA) and Richemont CFR.VX to report surprisingly strong Christmas sales, after suffering the worst industry slump in two decades.

Hermes, with a product range spanning silk scarfs and 20,000-euro crocodile handbags, reported the strongest fourth-quarter sales growth of all, comfortably beating forecasts, and lifted its own profit expectations for the year.

“Christmas was better than expected, we had not foreseen such growth,” Finance Director Mireille Maury told Reuters. “We are optimisitc (about 2010),” she added.

In the fourth quarter Hermes’s leather goods sales rose 16.8 percent at constant currencies to 278.7 million euros, silk and textiles were up 17.7 percent and ready-to-wear and fashion accessories were up 12.2 percent.

LVMH late on Thursday posted a 1 percent rise in its like-for-like fourth-quarter sales and a smaller than expected drop in 2009 operating profit, citing signs of improvement in watches, spirits and champagne. [ID:nLDE61112S]

The firm said it produced record sales in December and several divisional heads gave relatively upbeat trading updates, while Chief Executive Bernard Arnault said the crisis meant “bling bling” was out and authentic and genuine luxury was in, a trend which analysts say tends to benefit strong and well established brands.

Hermes, the world’s third biggest luxury goods maker after LVMH and Richemont in terms of market value, said it now expected a slight rise in its current operating profit for last year, having previously expected a small drop.

Net profit should be about the same as it was in 2008, it added.

“With that, Hermes is the only one in our luxury goods universe achieving positive organic growth for 2009,” analysts at Vontobel said in a note.

Looking at 2010, Hermes said it expects sales to rise 5 percent at constant currencies after climbing 4.1 percent in 2009 and aims to maintain its operating margin.


U.S. consultancy Bain & Co expects global luxury sales to rise 1 percent this year after falling 8 percent last year.

Earlier this month, several luxury groups including Burberry (BRBY.L), Richemont and Swatch UHR.VX published forecast-beating 2009 sales on the back of a strong Christmas and gave relatively upbeat trading updates.

The positive news flow had already boosted share prices after several analysts upgraded their 2009 and 2010 forecasts for companies in the sector including Hermes and Gucci Group, owned by PPR (PRTP.PA), whose numbers are due on Feb. 18.

Shares in Hermes were down 2.4 percent at 94.8 euros by 1130 GMT on Friday, while LVMH was down 4 percent at 74.80 euros.


Echoing Hermes, LVMH said all of its businesses had improved in the fourth quarter. On a like-for-like basis, LVMH’s wines and spirits sales fell 6 percent, perfume and cosmetics rose 2 percent and watches and jewellery were up 5 percent.

Like-for-like turnover from LVMH’s fashion and leather brands which include Louis Vuitton and Celine, rose 3 percent in the quarter while selective retailing, which includes the beauty products retailer Sephora, was up 4 percent. For related Sephora CEO interview see [ID:nLDE6132KH].

Hermes’s retail network helped shield the Paris-based company from the crisis, with Hermes shops generating about 80 percent of total sales and wholesale 20 percent.

In the fourth quarter its boutiques enjoyed an 18 percent surge in sales, a performance Maury described as “exceptional.”

Full-year sales by the boutiques were up 17 percent at current exchange rates and 12 percent at constant currencies, while wholesale turnover was down 17 percent at constant currencies.

In comparison German fashion house Hugo Boss BOSG_p.DE, which depends on wholesale for two thirds of its turnover, reported a 7 percent drop in 2009 sales earlier this week. However, like others it benefited from improved trading in the fourth quarter. [nLDE612225] ($1=.7207 euros) (Editing by Hans Peters, Greg Mahlich)

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