Hermès, Reliant on China for Sales, Posts H1 Profit Growth

For many fashionistas, imagining a world without new Birkin bags is a terrible thing. That almost came true in some months of 2017 as Paris-based fashion house Hermès struggled to meet the demand for its iconic handbags, particularly in China. The Asia-Pacific region has become responsible for about 35 percent of all sales worldwide of Hermès bags, scarves, leather goods, fashion, etc. Now, as the company released its first-half results on Wednesday, that sector of global demand that was under scrutiny to see if U.S. tensions and trade woes with China have impacted the luxury titan’s bottom line were alleviated. Its reliance on China sales leaves Hermès highly vulnerable to shifts in trends, mood, and the economy of China. In July, Bloomberg asked: Can Trump’s Tirades Dent Hermès’s Hotness? It appears that speculation of an impact from the China-U.S. trade war has not had an effect on sales. Hermès reported first-half 2018 net profit increased 17 percent year-on-year to $822.7 million (EUR708 million). Sales in Asia (excluding Japan) in the half increased 7.4 percent to $1.245 billion (EUR 1.072 billion), with revenue in the region growing 8.6 percent year-on-year in the second quarter. The company issued vague guidance for the second half of the year, stating: “In the medium-term, despite growing economic, geopolitical and monetary uncertainties around the world, the group confirms an ambitious goal for revenue growth at constant exchange rates.” The company stated in the release that “Asia, excluding Japan, continued its outstanding performance, with positive momentum in continental China and the whole region.” All of Asia accounted for almost half of total sales in the half. The company’s growth in China was attributed to store openings in Hong Kong and Changsha, Hunan Province. Hermès also opened its 25th store in China in Xi’an earlier this month. The company said that it plans to launch a Chinese-language website in October and is looking into selling its products through e-commerce company JD.com. Share prices of Hermès ended trading today at $644 (EUR 554), near its high for the year of EUR 614. The company’s shares ended Tuesday trading at $621 (EUR 533.8). According to Marketwatch, the majority of analysts following the stock have it as a hold. Hermès was founded in 1837 crafting leather harnesses, feedbags and, later, saddles, for the carriage trade of French noblemen.

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Hermès, Reliant on China for Sales, Posts H1 Profit Growth