Birkin bag maker Hermes says Chinese sales momentum still strong

PARIS (Reuters) - French luxury handbag label Hermes said on Friday that sales momentum in its Chinese stores stayed strong in the fourth quarter, adding to reassuring signals from rivals over enduring demand in one of the industry’s biggest markets.

A pedestrian walks past the Hermes store in Boston, Massachusetts, U.S., April 26, 2017. REUTERS/Brian Snyder

Luxury groups rely on Chinese consumers for over a third of sales, sparking investor jitters over the potential fallout for the sector from China’s slowing economic growth and the Washington-Beijing trade war.

Labels heavily exposed to markets where Chinese tourism appears to be on the wane, such as Coach owner Tapestry or jeweller Tiffany in the United States, suffered as a result.

But some of the biggest luxury goods players including LVMH’s Paris-based Louis Vuitton have recently stressed that demand for their wares was if anything picking up in China.

“We are still growing strongly in Asia, we did not see any change in momentum in our stores in China,” Hermes Chief Executive Axel Dumas told journalists on Friday, after the group posted a 9.6 percent rise in fourth quarter sales at constant exchange rates, unchanged from three months earlier.

Sales in Asia Pacific, excluding Japan, were up 13.1 percent at constant currencies, picking up from 11.7 percent growth in the third quarter.

Fourth quarter revenues rose 10.1 percent on a reported basis to 1.7 billion euros ($1.93 billion).

Hermes, which launched its e-commerce site in China at the end of last year, will roll out its online business to other Asian countries, Dumas added, without detailing where.

The French label, whose $10,000-plus Birkin bags are famed for drawing waiting lists, said it expected its operating margin to be close to 34 percent for 2018, potentially dipping from the 34.6 percent record reached in 2017.

Its full results will be released on March 20.

Dumas said that anti-government “yellow vest” protests in France late last year had weighed on some of the business it usually does with tourists in Paris, but added that spending had shifted to its stores elsewhere, including in Italy and Britain.

Luxury boutiques closed their doors on several successive Saturdays after the protests descended into riots in early December, and many visitors to France cancelled hotel bookings.

Hermes, originally a saddle specialist, is still adding to its production sites. It said this week it would build a 17th French leather goods workshop, in Normandy, in 2021.

Reporting by Sarah White and Pascale Denis, Editing by Leigh Thomas/Keith Weir