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French luxury group Hermès reported a slight acceleration in growth in the second quarter on Wednesday, driven by a recovery in tourism in Europe and strong demand in the U.S.
Second-quarter sales of products including handbags, silk scarves and perfume rose by 6.7 percent in currency-adjusted terms to €4.1 billion ($4.67 billion), Hermès said, in line with expectations and compared with 6 percent growth in the first quarter.
The report came after results from industry peer LVMH disappointed investors looking for signs that the luxury sector is finally turning a corner.
Hermès, which carefully controls production and sales to maintain exclusivity, had been the most resilient luxury group in a years-long industry-wide slowdown.
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Nonetheless, growth fell below high single-digit percentages in the first quarter after conflict in the Middle East dented shoppers’ appetite from Dubai to Paris.
The impact of the conflict weakened in the second quarter, the group said, while growth in France increased by 6 percent from a drop in the first quarter.
“In the second quarter, we are seeing improved momentum in our Paris stores,” said CEO Axel Dumas, adding that tourist traffic in the country improved in the second quarter.
Leather Goods Grow 10%
Hermès, which caters to the ultra-wealthy with handbags over $10,000, said its leather goods division, accounting for almost 50 percent of revenues, grew 10 percent in the quarter, slightly below a Visible Alpha consensus of 10.8 percent.
In Asia-Pacific excluding Japan, the biggest region by sales for Hermes, revenue grew at 2.5 percent in currency-adjusted terms, steady from the first three months of the year.
“I see the Chinese market stabilizing, but I do not yet see a fundamental rebound," Dumas told reporters, adding that despite the “uncertain” situation, he was nevertheless happy with the result.
“We are holding up well in an environment that, due to macroeconomic factors, isn’t exactly the most dynamic right now," he said.
Hermès shares have dropped 20 percent since the start of the year.
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By Dominique Patton; Editors: Jan Harvey and Louise Heavens
Learn more:
The French leather goods powerhouse is losing momentum and may soon face its own ‘Capucine moment,’ writes Luca Solca, drawing a comparison with Louis Vuitton in the early 2010s.
