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Birkin bag maker Hermes reinforces rosy view of China

Birkin bag maker Hermes reinforces rosy view of China
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By Sarah White

PARIS (Reuters) – France’s Hermes <HRMS.PA> reported strong third-quarter sales growth on Wednesday and the maker of $10,000-plus (7,600 pounds) Birkin handbags joined luxury sector rivals playing down fears of cooling demand in China.

Luxury goods companies have been rattled by investor fears of a potential slowdown in spending by Chinese customers – who account for a third of industry sales – as a trade war with the United States simmers on.

But Hermes, like Gucci-owner Kering <PRTP.PA> and other players targeting the same clientele, such as cosmetics firm L’Oreal <OREP.PA>, said those worries were groundless for now.

“We don’t see any change of pace at this stage,” CEO Axel Dumas told journalists, adding that both sales in mainland China and by Chinese tourists travelling overseas remained solid.

Britain’s Mulberry <MUL.L> – which specialises in handbags retailing at under 1,000 pounds ($1,313.20) – reported sliding sales in its home market in its first-half, but said it was still banking on growth in China and elsewhere in Asia.

“China for us can only grow,” CEO Thierry Andretta told Reuters, stressing that the label, which pushed into the region later than many peers, only had four shops there so far.

“We can go up little by little to between 15 and 20 stores,” Andretta added, saying this was a medium to long-term goal and that Mulberry was also looking to grow e-commerce in China.

Like top end brands Louis Vuitton of LVMH <LVMH.PA> and Gucci, Hermes has been among the big beneficiaries of thriving Asian demand, although that has made the firms susceptible to jitters over a potential end to the boom times.

Hermes shares have lost over 17 percent of their value since a peak at the end of May, though they are still are up almost 15 percent so far this year. The stock was down 0.6 percent at 1500 GMT.


Hermes’ revenues came in at 1.46 billion euros ($1.67 billion) in the July to September period, rising 9.7 percent from a year ago at constant currencies, driven by its leather goods division.

The growth was slightly slower than a quarter earlier, and Hermes’ silk scarves division, which faced tougher year-ago comparisons, recorded a weaker performance. But it still beat some analyst expectations.

“Another solid quarter from Hermes with a particularly reassuring performance in the most profitable leather division,” RBC Capital Markets analyst Rogerio Fujimori said in a note.

Mulberry’s retail sales in the six months to end-September fell 11 percent in the United Kingdom, which accounts for almost three quarters of its revenue, hit in part by the administration of department store House of Fraser.

But the company said it was well placed for the Christmas trading period in Britain, and its international sales increased 13 percent. Total group sales were down 8 percent.

Mulberry’s shares were down 2.9 percent.

Italian luxury group Tod’s <TOD.MI> is due to report sales later on Wednesday, while Salvatore Ferragamo <SFER.MI> and Britain’s Burberry <BRBY.L> will release earnings on Thursday.

The three are among the industry players that have struggled to catch the sector’s sales rebound, and are shifting their styles and strategies. ($1 = 0.7615 pounds)

(Additional reporting by Pascale Denis; Editing by Keith Weir and Elaine Hardcastle)

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