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Hermes sales growth may miss goal as luxury industry suffers

Wednesday, February 10, 2016 - 16:32
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French luxury-handbag maker Hermes International SCA said sales growth this year may miss its medium-term goal, showing how China's slowing economy is weighing on even the most exclusive brands.

[PARIS] French luxury-handbag maker Hermes International SCA said sales growth this year may miss its medium-term goal, showing how China's slowing economy is weighing on even the most exclusive brands.

Revenue could rise by less than the company's goal of 8 per cent at constant exchange rates, Paris-based Hermes said in a statement Wednesday, citing "economic, geopolitical and monetary uncertainties around the world." The shares fell the most in more than a year.

Recent earnings reports from luxury-goods makers have been glum, with Richemont's Christmas season sales dropping for the first time in seven years and Swatch Group AG's 2015 profit missing estimates. Slowing economic growth in China, along with tumbling stock markets and oil prices have crimped demand for high-end goods.

Hermes's outlook "is likely to weigh on the sector," said John Guy, an analyst at MainFirst Bank AG, who forecasts luxury- industry growth of about 2 per cent in 2016.

Hermes shares fell as much as 5.6 per cent in early Paris trading, the steepest intraday drop since December 2014.

The company also reported its slowest sales growth in six years as November's Paris terrorist attacks led to a drop in tourist spending. Revenue climbed 7.2 per cent at constant exchange rates in the fourth quarter of 2015.

For all of last year, operating profitability was close to 2014's 31.5 per cent after being weighed down by currency shifts, the maker of $9,400 handbags said.

BLOOMBERG