Hermès Quarterly Sales Trail Estimates as Japanese Revenue Falls

PARIS, France — Hermès International SCA, the maker of Kelly handbags, reported second-quarter sales that trailed estimates due to the weakness of the yen and after a Japanese sales tax increase weighed on growth.

Revenue climbed 5.8 percent to 963.4 million euros ($1.3 billion), Paris-based Hermès said today in a statement. Analysts predicted 971 million euros, according to the median of 11 estimates compiled by Bloomberg. Sales excluding currency swings and acquisitions rose 9.6 percent.

The first-half operating margin will probably be “close” to 32.4 percent, and “slightly lower” compared to the same period last year because of the currency effect, Hermès said. The company, which is expanding French production and global distribution, said in April the investments plus the weakness of the Japanese yen would weigh on full-year profitability.

“Hermès will continue its long-term strategy,” which includes maintaining control of its know-how, the company said in the statement. In addition to Japan, where sales fell 6.3 percent, watches was another area of weakness with sales of the category declining 15 percent in the quarter, hurt by weaker wholesale demand in China, Hermès said.

Earlier this month, Burberry Group Plc, the U.K.'s largest luxury-goods maker, reported a 9 percent increase in quarterly retail revenue. Chinese tourist transactions in Europe grew in the period, while Asia-Pacific sales rose by a double-digit percentage, said London-based Burberry, easing concern that demand for luxury goods is waning.

By: Andrew Roberts; Editor: Celeste Perri