Reuters - Video

Edition: U.S. | U.K. | IN | CN

Finance Videos

Battle of the bag makers

Thursday, March 20, 2014 - 01:56

Mar. 20 - Hermes hikes its dividend on a record high operating margin. Mulberry CEO's quits after a turbulent two years. Joanna Partridge compares the diverging fortunes of the two rival companies in the luxury goods sector.

▲ Hide Transcript

View Transcript

You could call it the battle of the bags. Times are good at France's Hermes, especially compared with the current troubles at Britain's luxury fashion group Mulberry. Hermes - best known for its Birkin handbags and silk scarves - has posted a new rise in profits and record-high operating margin in 2013. That's allowed it to hike its dividend. Hermes commands one of the highest ratings among European luxury stocks due to the brand's resilience to swings in demand. It's also enjoyed resilient growth, despite a crackdown on corruption in China which has dented sales of other luxury goods from LVMH's Louis Vuitton and Kering's Gucci. There have also been concerns a slowdown in emerging markets could hurt some luxury brands, says Richard Jeffrey from Cazenove Capital Management. SOUNDBITE: Richard Jeffrey, Chief Investment Officer, Cazenove Capital Management, saying (English): "Growth has not collapsed, but it's not as strong as it was, so I think those markets might become slightly more difficult. On the other hand, what we're beginning to see in the West is the cycle maturing a little bit with growth picking up or expected to pick up in the United States, also in the UK, and I think we will also see stronger growth on mainland Europe as well. So that should actually boost demand for luxury goods. Now it may not be as exciting as what's going on, or had been going on, in emerging markets, but there will be more disposable income in the West." Slowing sales at home and abroad hurt Mulberry in the last few months. Now Bruno Guillon has quit as CEO after just two years, bringing to an end a tenure marked by three major profit warnings. Mulberry's shares gained around 2% on news of his departure. Guillon joined Mulberry from Hermes, and tried to steer the brand upmarket - which included hiking prices. But that move hasn't yet paid off. Last September, the group also lost Emma Hill, the creative director behind some of its hit handbags like the Alexa - and they still haven't appointed a replacement.

Press CTRL+C (Windows), CMD+C (Mac), or long-press the URL below on your mobile device to copy the code

Battle of the bag makers

Thursday, March 20, 2014 - 01:56