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Slow down for Hermès sales growth in Q2 2014, impacted by Asian Markets

French luxury house Hermès  reports today that second-quarter sales grew 5.8%, a slower sales growth rate than in recent quarters.

Hermès said its sales in the second  €963 million ($1.3 billion) second quarter, up from €910 million last year. Excluding currency fluctuations such as the weakening yen, sales would have increased 9.6%.

Hermès’ second-quarter growth marks a slowdown compared with the 10% jump it recorded in the first quarter, and the 12% growth it achieved in the same period last year.

The more subdued growth at Hermès sends a signal that the luxury-goods market is facing curbs on its growth. Hermès, which is seen as the most exclusive of the major luxury brands, often logs the strongest growth in the sector.

Hermès watch sales declined 15% in the second quarter. Hermès said the wholesale trade of watches is difficult, especially in China. Watches in China became a social marker of wealth, one that has become stigmatized amid an anti-corruption crackdown by the government.

Another challenge for Hermes in Asia is Japan, where sales dropped 6.3% in the second quarter. Luxury goods sales in Japan had been boosted in the first quarter ahead of a sales tax increase. Excluding the effect of the weak yen, sales in the second quarter inched up 1.6% in Japan.

Hermès said weak foreign currencies will hit its bottom line. It forecast that its first-half operating margin, which it will publish next month, will be “slightly lower” than the 33.1% margin it recorded last year in the first half. The company added it will be “close” to the full-year margin last year of 32.4%.

Hermès Silk Ball in London, June 2014

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