Hermes, L'Oreal reinforce French luxury as a bright spot for China

[GENEVA] The more quotidian parts of China's growth engine may be sputtering, but products designed for the country's shopping-mad upper classes are still powering ahead.

The latest evidence comes from leather-goods marque Hermes International and cosmetics giant L'Oreal SA, each reporting Asian fourth-quarter sales that rose at double-digit percentage rates.

Hermes sales at constant currencies grew 13 per cent in Asia excluding Japan, the company said Friday. At L'Oreal, which reported results Thursday evening, sales in China contributed to the best performance in 40 quarters, according to analysts led by Richard Taylor at Morgan Stanley.

"We remain confident in the Chinese growth because it is driven by the structural development of the upper middle class who aspires to affordable luxury," said Nicolas Hieronimus, L'Oreal's deputy chief executive officer, in a briefing.

China's economy grew last year at the slowest pace since 1990, hitting companies ranging from Apple Inc to Nvidia Corp to Caterpillar Inc. Nevertheless, a feared slowdown in luxury spending hasn't materialised. Last month, Louis Vuitton owner LVMH said it saw strong demand in China for wines and spirits, and especially for fashion and leather goods. That followed similarly upbeat reports from Richemont, the maker of Cartier necklaces and Piaget watches, and jeweller Tiffany & Co.

Overall at Hermes, fourth-quarter revenue rose 9.6 percent at constant exchange rates to 1.65 billion euros (S$2.54 billion), matching analysts' estimates.

L'Oreal's fourth-quarter sales increased 7.7 per cent on a comparable basis, beating analysts' average prediction of 6.5 per cent.

L'Oreal rose as much as 1.2 per cent in Paris, while Hermes gained as much as 1.7 per cent.

BLOOMBERG