Record profits at Hermes underscore luxury sector's upturn
By Dominique Vidalon
PARIS (Reuters) - French luxury goods group Hermes (HRMS.PA: Quote) said it had started this year on a solid footing after announcing record 2016 profits on Wednesday, providing further evidence of a broader recovery in the luxury goods industry.
Hermes, known for its $10,000 Birkin bags and $400 printed silk scarves, followed larger rivals LVMH (LVMH.PA: Quote) and Kering (PRTP.PA: Quote) - owner of Gucci and Yves Saint Laurent - in reporting an improvement in the sector although it was still cautious.
Chief Executive Axel Dumas said Chinese tourists were returning to Europe, but numbers were not yet back to previous levels, and many were favoring Britain and Italy "to the detriment of France".
"We did better than we expected in 2016 and we are entering 2017 on a solid base but remain cautious in view of an uncertain environment," Dumas told a conference call, after the group announced a 13 percent rise in 2016 net profit to 1.1 billion euros ($1.2 bln).
It increased its dividend by 12 percent although analysts at Bryan Garnier said there was some disappointment it did not pay out a special dividend. Its shares, which hit a record high this month, were down 0.5 percent at 426.20 euros in mid-session trading.
The luxury industry has suffered in the past couple of years as demand in China slowed and attacks in France deterred some tourists from Europe.
Hermes's sales growth last year mainly stemmed from a strong performance at its leather goods arm, which makes up 50 percent of group sales.
Dumas did not give a detailed guidance for 2017. He said the group was looking at capital expenditure of between 280 million and 300 million euros, opening three stores in China, Brazil and Turkey and launching a new perfume. He ruled out following larger rivals LVMH (LVMH.PA: Quote) and Kering (PRTP.PA: Quote) into eyewear. Continued...