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Hermès sales rise 10.6% despite China slowdown, leather goods and ready-to-wear demand “dynamic”

French luxury goods house Hermès International overcame sluggish demand in China to deliver improved sales in Q3, driven by strong demand for its leather goods and ready-to-wear, but although Hermès stood by its full-year targets it admitted its operating margin could be slightly lower than 2013. For Q3, Hermès sales rose 10.6% year-on-year, or up 11.1% currency neutral, to €990.6m ($1.24bn), boosted by a strong showing in its stores. Q2 sales had risen 5.8%.

At the end of September Hermès said currency fluctuations had a negative €77m impact on revenue but Q3 sales in Asia, excluding Japan, still rose 10.2% to €337m despite recent events in Hong Kong and the slowdown in China’s luxury market, it said. Japan sales rose a “buoyant” 16.4% to €120.2m.

The Americas sales lifted 16.9% to €174.2m with European sales up 7.3%, excluding France, to €559.2m, despite a difficult economic climate, it said. France sales alone lifted 6.2% to €153.3m.

A “dynamism” in ready-to-wear and accessories sales was reflected in a 9.1% rise in the sector’s sales to €235.4m. Growth in leather goods and saddlery meant sales jumped 19.3% to €454m, supported by the increased production capacities of the two new sites in Isère and Charente.

Silks and textiles sales lifted 3.6% to €102m on a continued expansion of its collections “with new formats and exceptional materials”.

Fragrance sales grew 11.8% to €57.1m, although watch sales fell 14% to €36.5m as wholesale sales remain challenging, particularly in Asia but excluding Japan, it explained.

For the full year, the group is retaining its mid-term objective of revenue growth at constant rates of around 10%, but operating margin could be slightly less than the all-time high achieved in 2013 (32.4%) due to the negative impact of currencies.

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