Hermes remains “ambitious” when it comes to revenue growth
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Hermes remains “ambitious” when it comes to revenue growth

Luxury leather handbag specialist Hermes International SCA has kept “an ambitious goal” for revenue growth in the medium term. Despite “growing economic, geopolitical and monetary uncertainties around the world” it is increasing the production of products like its $10,000 Birkin bags. The company made this announcement last Friday, when it released second-quarter growth figures that matched analysts’ expectations.

Hermes share price is up 21%, year to date

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SOURCE: Yahoo Finance

Sales in the second quarter were up by 8.3% excluding currency shifts. This is slower than the 14% jump the company witnessed in the first quarter, but largely in line with predictions. The leather goods unit – Hermes most important – outperformed, delivering a 9.7% boost to revenue at constant exchange rates.

Hermes was largely insulated from a slowdown in luxury consumption in 2015 – 2016, and the company is now trying to increase production as demand for leather goods increases. Top priority is reducing the legendary waiting time for its signature handbags.

As the Swiss watch industry faces its longest ever slump on record, Hermes nonetheless saw watches return to growth. The division was up 2.9% excluding currency effects. However, this doesn’t mean it will be betting on a recovery in the industry. Hermes’ CEO Axel Dumas said: “I’m afraid the watch industry and our watch business will continue to be lukewarm, even if we are maintaining sales in our stores.”

For now, Hermes is keeping its attention squarely on the leather goods that its best known for. The company added two new workshops in June and 120 jobs in France in an effort to meet its “ambitious” goals.

Disclosure

Dominion holds Hermes in its Global Trends Luxury Fund.


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