Hermes full-year earnings beat estimates on leather goods, Japan

[PARIS] French luxury handbag maker Hermes International SCA reported full-year earnings that beat analysts' estimates, buoyed by sales of leather goods and demand in Japan.

Operating profit rose 19 per cent to 1.54 billion euros (S$2.36 billion) on an adjusted basis, Paris-based Hermes said Wednesday in a statement before European markets opened.

Analysts predicted 1.52 billion euros, based on the average of 16 estimates.

Hermes is benefiting from two new productions sites in France, which are boosting its supply of handbags and other leather goods.

Earnings were also buoyed by sales in Japan, which has seen an influx of Chinese tourists.

Still, the company kept its guidance for 2016, saying growth could be below its medium-term goal of 8 per cent growth at constant exchange rates due to global economic and political risks.

The company plans to raise prices about 3.5 per cent this year in Europe, in line with production costs, Chief Executive Officer Axel Dumas said on a call with reporters.

He declined to provide an operating margin forecast or comment on current trading, saying it was too early to do so.

Hermes lowered its sales outlook for a second year in February, predicting currency-neutral growth at less than half the level of the start of this decade.

China's cooling economy, financial market volatility and terror attacks in Europe are weighing on even the most exclusive brands. The company's fourth-quarter revenue increase was the weakest in six years.

The operating margin was 31.8 per cent, Hermes said. The company had estimated the 2015 operating margin would be close to 2014's 31.5 per cent because of adverse currency shifts.

Hermes said it plans to pay a dividend at 3.35 euros a share.

The luxury market will expand about 2 per cent in 2016, according to MainFirst Bank AG. The maker of 4,200-euro saddles is targeting revenue of 6 billion euros by 2020.

BLOOMBERG