Hermes second-quarter sales hit by currencies, weakness in Japan

PARIS, France - Sales growth slowed down at French luxury goods maker Hermes in the second quarter against the first, hit by lower demand in Japan and America and by adverse movements in foreign exchange rates.

Revenue growth at Hermes, known for its classic Kelly leather bags and printed silk scarves, slid to 5.8 percent from 10.1 percent in the first quarter in reported terms.

Sales growth in Japan, one of its biggest markets, reached only 1.6 percent in constant currencies, down from 21.7 percent in the first quarter when trading was boosted by price increases and advanced purchases ahead of a VAT hike on April 1.

In America, where business has been particularly buoyant in recent years, revenue growth slowed down to 7.9 percent from 17.9 percent in first quarter at constant currencies.

"Growth in Japan and the United States was a little softer than expected," Eva Quiroga, luxury goods analyst at UBS in London, said.

Watch sales also suffered during the period, down 7 percent at constant exchange rates year on year, as wholesale revenue dropped, notably in China.

Hermes said its leather goods division benefited from a ramp-up in production at new sites but at constant currencies, sales growth from that unit stood at 13 percent, down from 15.5 percent in the previous three months.

The company flagged that its first-half operating margin, to be reported next month, would be slightly lower compared to the first half of 2013 and close to the historical high reached during the full year 2013 or 32.4 percent.

Overall, second-quarter revenue reached 963.4 million euros ($1.3 billion) in the three months to June 30, up from 943.5 million euros.

The year-on-year rise at constant currencies came at 9.6 percent, against 14.7 percent in the previous quarter.