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Family business Hermes raises full-year sales targets

Hermes, best known for its silk scarves and Birkin bags, has become the latest family business to benefit from rising demand for luxury goods, with the company raising its full-year sales targets after achieving a strong third quarter.

Hermes, best known for its silk scarves and Birkin bags, has become the latest family business to benefit from rising demand for luxury goods, with the company raising its full-year sales targets after achieving a strong third quarter.

The Paris-based luxury goods company today (4 November) forecasted revenue increases of between 15% and 16% at constant rates of exchange this year, up from the 12% to 14% it predicted in August.

"Meeting this target will be highly contingent on the business sectors' ability to meet stepped-up demand ahead of the year-end holiday season," said Hermes in a statement.

Its third-quarter sales grew by almost 16% year on year to €683.2 million and by over 18% when currency fluctuations are excluded, thanks in part to growing demand for luxury goods in Asia. Sales in the region, excluding Japan, jumped by 34% during the quarter.

Fellow family businesses have also recently reported strong growth in the region, with Prada’s sales in Asia-Pacific, excluding Japan, growing by 35% to €368 million during the first six months, while Richemont saw a 59% rise in the region, compared to just 22% in Europe, between April and September.

Asia is likely to account for the majority of growth experienced by luxury companies over the coming years, according to Aaron Fischer, regional head of consumer research at CLSA Asia-Pacific Markets.

“Domestic spend on luxury goods in Hong Kong could slow down, because of the impact of the weak financial markets. But in China, rising income and social factors are very supportive of luxury good sales. The increased supply of stores will also fuel demand for luxury products,” he said.

This means the outlook for family-controlled luxury companies is good, added Swiss & Global Asset Management‘s Scilla Huang Sun.

“Wealth creation is the main driver of luxury spending and the number of affluent emerging market households is expected to increase from 2010 to 2020, which bodes well for the long-term growth of the luxury industry,” she said.

Hermes also reported strong sale in the Americas, up 22%, while sales in Europe, excluding France, grew by 20%.

In the statement, the luxury company, currently managed by sixth-generation descendants of the company founder Thierry Hermes, added that it had spent €211.7 million buying back 912,662 of its own shares, as it attempts to ward off possible takeover attempts by rival LVMH.

Fifty members of the Hermes family were recently given permission by a French court to create a holding company, which would make a potential sale to LVMH much more difficult.  

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