Hermes luxury sales dazzle, despite graft drive in China

PARIS (AFP) - French luxury group Hermes achieved record sales last year, and said on Thursday its scarves and handbags flew off the shelves in China despite a clampdown on ostentatious spending there.

Overall sales last year rose by 7.8 per cent to exceed 3.75 billion euros (S$6.5 billion) for the first time, and the group said it would soon raise its prices.

And in China the company pushed sales up by nearly 20.0 per cent before allowance for exchange rates.

The one exception was sales of Hermes watches which suffered in China. But the fastest growth was in the United States.

"It has been a very good year. The fourth quarter was very good and the trend for 2014 is good for now," chief executive Axel Dumas told AFP. The company, which publishes its full results for 2013 at the end of March, is known particularly for its silk scarves, but also makes and retails a wide range of products including Kelly and Birkin brand handbags, and perfume.

It does 45.0 per cent of its business in Asia, with the Japanese being its biggest customers, and has suffered from unfavourable exchange rates, notably a fall of the yen against the euro.

Currency effects reduced the overall figure by 183 million euros.

Hermes said it would respond by raising prices in Japan by 10.0 per cent within a few days, but would raise prices elsewhere by 3.0 to 5.0 per cent.

Many companies in the luxury products sector have reported suddenly running into a slowing of sales in China where a campaign against corruption has reduced the giving of expensive gifts, and also lavish entertainment and consumption of expensive drinks.

A slowing of the Chinese economy has also hit the sales of some companies sharply.

But Hermes "has not felt the slowdown," Mr Dumas said.

Chinese customers are looking increasingly for high quality and discreet products, "and that is good for us", Mr Dumas said.

The group was cautious about the outlook for this year but held to its target of 10.0-per cent internal growth at constant exchange rates, after a rise of 13.0 per cent last year.

Hermes has produced one of the best performance in the luxury sector, and "growth at Hermes remains extremely firm," said Aurel BGC analyst David Da Maia.

Hermes has a rare position with very high-range, exclusive products and limited production capacity, he said. The sales figures are the latest in a line of strong performances which have more than doubled sales since 2008.

Sales in Europe held up, carried by sales to tourists, and in France they rose 10.4 per cent.

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