Hermès Quarterly Sales Accelerate as Japan Buoys Asia Pacific

PARIS, France — Hermès International SCA reported a 22 percent increase in second-quarter sales as growth in Japan offset a slowdown in the rest of the Asia-Pacific region.

Revenue rose to 1.17 billion euros ($1.27 billion), Paris- based Hermès said in a statement Tuesday. Analysts predicted 1.16 billion euros, according to the median of 14 estimates compiled by Bloomberg. Excluding currency swings, sales climbed 10 percent, accelerating from the first quarter's 8 percent gain and beating analysts' expectations for an 8.9 percent advance.

Hermès and other luxury-goods makers are feeling the effects of slowing demand in China after years of double-digit growth. Still, the Birkin-bag maker's high prices and limited supply have helped cushion the blow, and the 178-year-old company is the least exposed of peers to slumping demand in Hong Kong, where it has seven stores, according to Sanford C. Bernstein.

First-half operating profitability should be down "slightly" on the year-earlier period because of the weaker euro, said Hermès. The company retained its mid-term goal for revenue growth of about 8 percent at constant exchange rates.

Hermès said in March currency volatility will continue to drag on profitability. Year-ahead hedging rates mean currency shifts will narrow the operating margin by 0.5 percentage points in 2015, the company said at the time.

Fewer wealthy Chinese are purchasing expensive bags and coats in Hong Kong, preferring instead to shop in Japan and Europe where it's cheaper. U.K. luxury-goods maker Burberry Group Plc said last week it may try to lower its rent bill in the island city to offset a worsening slump there that drove sales growth to a two-year low.

By Andrew Roberts; editors: Matthew Boyle, Paul Jarvis, Thomas Mulier.