Hermes warns of potential for further dip in sales growth

Wed Feb 10, 2016 7:43am EST
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By Astrid Wendlandt

PARIS (Reuters) - French luxury goods maker Hermes (HRMS.PA: Quote) has yet to see its business in Paris recover from November's deadly attacks on the city and warned of a potential further slowdown in global sales this year.

Hermes, known for its colorful silk scarves and its Kelly and Birkin leather handbags, said on Wednesday that growth in its domestic market slowed to 1 percent in the last three months of 2015, down from 7.9 percent and 9.7 percent in the previous quarters.

"Tourist flows have not yet returned to normal," Hermes Chief Executive Axel Dumas told Reuters, referring to the Paris attacks. Hermes makes 14 percent of its turnover in France.

Hermes predicted that 2016 sales growth could be below its medium-term target of 8 percent, citing global economic and geopolitical uncertainty.

Shares in the company fell by more than 4 percent in early trading but were up 1 percent by midday, helped by a rising French stock market.

"We would not read too much into Hermes's guidance in earnest: it has a history of over-prudence and it is very early in the year," said JP Morgan Cazenove analyst Melanie Flouquet, who kept her 2016 estimates unchanged, including sales growth of 7.5 percent.

Hermes posted an 8.1 percent rise in full-year sales at constant exchange rates, one of the highest growth levels in the sector but a clear slowdown from 2014.

Sales reached 4.84 billion euros ($5.46 billion) last year, broadly in line with forecasts, with growth slowing from the previous year's 11.1 percent.   Continued...

A handbag is on display at Hermes shop during a press preview in Russia's landmark GUM shopping centre on the Red Square in Moscow, Russia, December 9, 2015.   REUTERS/Sergei Karpukhin