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Hermès fashion sales strong in H1 as sales, earnings rise but forecasts drop in full-year margin

French luxury fashion house Hermès Friday posted single digit rises in H1 earnings and sales but blamed foreign exchange rates for denting profits and forecast a related drop in its operating margin this year. However, Ready-to-wear and Accessories were again its star category in H1, with sales jumping 16%, benefitting from the success of its latest collections, notably in fashion accessories, it said Friday. Net profit in the first half rose 8% to €413m, up from €382m a year earlier. Operating profit rose to €621m ($818m), from €584m a year ago.

Group sales rose 8% to €1.9bn, with growth in all geographic regions, particularly in the US and Japan, which helped to offset a weaker performance in China. The company previously reported Q2 sales of 5.8% compared to 10.1% gain in Q1.

Europe saw 7% sales growth in a particularly difficult economic context, 11% growth in Japan, 13% in the Americas and 17% in Asia, excluding Japan.

Sales growth in Leathergoods and Saddlery rose 13%, supported by the ramp-up of the production capacities in the two new sites that opened in 2012, namely in Isère and Charente. The construction projects for two new production units in Franche-Comté were launched, it noted.

The Silk & Textiles sector saw an 11% sales hike while Perfumes rose 8%, benefitting from the launch of the new women’s fragrance Jour d’Hermès.

Watches, however, fell 7%, “penalised by sales to specialised networks in an always difficult market, notably in China”, said Hermès.

Other sectors rose a combined 18%, including Jewellery, Art of Living and Tableware.

The company posted a decline in H1 operating margin to 32.6% from 33.1% a year ago and said its full-year margin would be below 2013’s 32.4% level. Net cash amounted to €946m as of June 30.

Hermès reiterated its mid-term objective of revenue growth at constant rates of around 10%. Operating margin should be lower than the all-time high achieved in 2013 (32.4%) due to the negative currency impact, it said.

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