Hermes leather sales down in third-quarter, hit by weak yen, dollar
By Astrid Wendlandt
PARIS (Reuters) - French luxury goods maker Hermes, known for its Kelly and Birkin handbags, suffered a 0.5 percent drop in leather goods sales at current currencies in the third quarter, one of the worst performances of its biggest business in recent years.
Hermes, with Japan and the United States as major markets, was hit by the weakness of the yen and U.S. dollar in the quarter, and saw third-quarter sales rise by 5.5 percent to 895.5 million euros on a reported basis.
The 176-year-old company, whose leather handbags start at about 5,000 euros ($6,800) and make up 44 percent of its total business, said currency fluctuations knocked 116 million euros off its nine-month turnover of 2.66 billion euros to end-September
Sales from Japan dropped nearly 20 percent in the third quarter on a reported basis at current currencies, but they were up nearly 6 percent at constant currencies.
"The performance is not as good as expected in leather goods and we would like to know if it is because of production constraints or delays in shipments to the shops," said luxury goods analyst David da Maia at brokerage Aurel BGC.
Hermes, which was originally due to publish its third-quarter sales on Thursday at 0600 GMT, will hold a conference call with analysts at 0800 GMT.
Overall, third-quarter sales rose 12.9 percent at constant exchange rates, slightly below expectations of 13.4 percent.
Hermes said its full-year sales growth at constant currencies could exceed 11 percent, higher than its previous forecast of growth of slightly more than 10 percent.
Hermes said it expected its operating margin this year to be close to its record of 32.1 percent in 2012. At the half-year stage, the operating margin was already at 33.1 percent.
"It is a touch below expectations but the performance differential compared with what we have seen so far in the space make it a decent set of results, the guidance is still quite encouraging. We would expect a very limited, maybe slightly negative stock reaction," a Paris-based trader said.
At constant currencies, silk products had growth of 13 percent and ready-to-wear and fashion revenue rose 19 percent. Sales from watches were up 5.3 percent, while leather goods rose 8.4 percent.
($1 = 0.7392 euros)
(Reporting by Astrid Wendlandt; additional reporting by Alexandre Boksenbaum-Granier; Editing by James Regan and Patrick Lannin)
