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French handbag maker Hermes posts record first half margins

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By Reuters
French handbag maker Hermes posts record first half margins
FILE PHOTO - A woman is seen inside the new Hermes boutique in Rome, Italy October 7, 2016. REUTERS/Tony Gentile   -   Copyright  Tony Gentile(Reuters)

By Sarah White and Pascale Denis

PARIS (Reuters) – France’s Hermes <HRMS.PA> on Wednesday said operating margins reached a first-half record at the start of 2018, after resilient demand in key markets like China helped the luxury handbag maker and most of its major rivals lift profits.

The label, known for its $10,000 (£7,687)-plus Birkin bags and patterned silk scarves, said recurring operating income reached 985 million euros (£877.29 million) between January and June, up 6 percent from a year earlier.

That did not include one-off items such as the disposal of shops in Hong Kong. Recurring operating margins reached a first-half record at 34.5 percent of sales, up from 34.3 percent in the first six months of 2017.

Luxury goods makers from Louis Vuitton owner LVMH <LVMH.PA> to Gucci-parent Kering <PRTP.PA> have benefited in the past two years from rebounding appetite from Chinese shoppers for their fashion ranges and handbags, boosting sales.

In July, Hermes reported robust revenue growth for the second quarter from a year earlier, and said demand in China was still strong in spite of a trade spat between Beijing and Washington.

That remained the case, Hermes Chief Executive Axel Dumas told journalists on Wednesday.

“There has not been any change in trend so far,” Dumas said.

Chinese consumers are key for luxury brands, accounting for around a third of all global sales in the industry. Fears of a slowdown in Chinese had rattled shares across the sector in recent months.

Shares in Hermes, one of the most highly-valued stocks among luxury players, are up 20 percent since the start of the year.

(Reporting by Sarah White and Pascale Denis; Editing by Sudip Kar-Gupta)