Hermès: Good Data in the First Half thanks to Japan

The French maker of handbags and other luxury goods Hermès has announced that its first-half sales rose 21% to €2.3 billion, higher than expected by the market consensus. In addition, operating profit rose 20% to €748 million, also beating the analysts´ expectations. Taking a quick look at the results, it is clear that the favorable performance of the company was due to strong business in Europe and Japan, which have managed to offset the weak demand from China.

Sales rose 20% in the Japanese market, both by the favorable comparison with last year and the fact that many Asian customers have gone to Japan to buy luxury products given the uncertainty in other markets such as Hong Kong. This has limited the growth of business in the rest of Asia, which grew just a 7%, below the company´s average in the last few years.

It Maintains Growth Targets
One of the most important commentaries of the company results is that it has decided to keep its target for revenue growth of 8% in the medium term (without taking into account the effect of exchange rates). This is a relevant news as sharp declines in markets in recent weeks have questioned the profit forecasts of the leading makers of luxury goods, by their exposure to China.

In any case, the company has not been able to avoid the impact of the turbulences in its accounting: Hermès will not be able to maintain the operating margin achieved last year (31.5%) due to currency fluctuations.

The results have not altered its evolution in the stock market, where it has performed relatively better than the industry. Its stock has fallen 10% since the outbreak of the Chinese crisis, against 15% lost by the big names of the sector (LVMH, Kering) or 20% lost by the most exposed companies to the Asian market (such as Prada or Richemont ). This is due to its refuge character, achieved through extreme care of the exclusivity of the brand.

Disclosure: The author is not responsible for the views expressed in the article. The text was written freely expressing ideas, without receiving any compensation. The author has no business relationship with any of the companies whose shares are listed in this article.