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Chinese Shoppers Snapping Up These Hermes Bags Are Helping the Industry Get Its Groove Back

Street Style : Paris Fashion Week - Menswear Fall/Winter 2017/2018 : Day FourStreet Style : Paris Fashion Week - Menswear Fall/Winter 2017/2018 : Day Four
May Berthelot, Head of Legal at Videdressing.com and fashion influencer, is wearing Topshop blue denim ripped jeans, an APC brown fur coat, a The Kooples hat, a purple Hermes Constance bag, and Zara black boots, on Jan. 21, 2017 in Paris, France. Edward Berthelot/Getty Images

Hermes said sales growth accelerated in the first quarter, beating expectations, as more Asian and American shoppers bought its Constance and Lindy bags, adding to evidence of a recovery in the luxury goods industry.

The French luxury goods group, also known for its $10,000 Birkin bags and $400 printed silk scarves, joined larger rivals LVMH and Kering – owner of Gucci and Yves Saint Laurent – in reporting strong quarterly sales.

Chief Executive Axel Dumas said that while all regions achieved good growth, Asia did “particularly well” thanks to stronger demand in mainland China. The U.S. business also performed strongly.

Hermes (HESAY) struck a cautious note over its outlook, saying that the growth seen at the end of March would not necessarily continue over the full year.

Hermes reported an 11.2% rise in revenue at constant exchange rates to 1.352 billion euros ($1.47 billion) compared with 6.6% growth in the last quarter of 2016.

This was above analysts’ expectations of 8.8% growth.

BNP Paribas analyst Luca Solca, who has a “sell” rating given Hermes’ high valuation, said the performance was beyond expectations but not on the scale of that delivered by Kering and LVMH.

By 07:33 GMT, Hermes shares were up 0.69% at 435.7 euros. Hermes shares rose 25% last year, and are up nearly 11% since the start of 2017, after hitting a record high of 468.3 euros on April 24.

The first quarter increase was led by a 15% jump in sales at its leather goods division, which makes up half of group sales, and by a 16% rise in Asian sales.

Echoing its peers, Hermes said the improvement was driven by most regions and by a pickup in demand from Asian customers, notably Chinese, both locally and abroad. .

“In China, there is an acceleration with a growing appetite for consumption following a government stimulus package launched in 2016,” Dumas told a conference call with journalists.

“Hong Kong and Macau are also back to a positive momentum. Overall the dynamism of mainland China drives the whole region.”

The luxury industry has suffered in the past couple of years as demand in China slowed and attacks in France deterred some tourists from traveling to Europe.

Asked about news this week that the family of French billionaire Bernard Arnault plans to sell its Hermes shares as part of a move to simplify its business interests, Dumas said: “The impact will eventually be favorable on the liquidity of the Hermes shares.”

Arnault’s family company is offering to pay for the buyout of minority shareholders in the Dior holding company partly with shares in Hermes, it which it still has an 8% stake.