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Hermes drops mid-term revenue target as luxury outlook worsens

Wednesday, September 14, 2016 - 14:46
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Hermes International SCA abandoned its mid-term annual sales growth target as political and monetary issues damp prospects for the luxury-goods market.

[LONDON] Hermes International SCA abandoned its mid-term annual sales growth target as political and monetary issues damp prospects for the luxury-goods market.

Hermes is no longer forecasting annual revenue growth of about 8 per cent excluding currency shifts, the Paris-based company said in a statement Wednesday. 

Instead, it has "an ambitious goal" for growth, it said as it reported first-half earnings that beat analysts' estimates.

"We have to be frank and transparent, we see first-half results that were better than we expected, but there is a lot of uncertainty around the world and the rigidity of written means we are less flexible," chief executive officer Axel Dumas said on a conference call.

The company anticipates earnings will be lower in the second half than the first, he said.

The wider luxury-goods market is still faltering as demand ebbs in Asia, causing industry peer Burberry Group Plc to pare its product assortment by as much as fifth.

Hermes has increased production of leather goods, the company's largest and most profitable division with some items commanding waiting lists that can run for more than a year.

First-half earnings before interest and tax rose to 826.8 million euros (S$1.262 billion), Hermes said.

Analysts predicted 818.5 million euros, according to the median of 12 estimates compiled by Bloomberg.

The maker of Kelly bags and silk scarves said last month that the operating margin improved by one per cent, helped by hedging on foreign-exchange rates.

BLOOMBERG