Hermes Expects Slower Sales Growth in 2015


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Hermes Birkin

Geopolitics and fluctuating currencies are impacting the world of haute handbags. Hermes, the luxury brand famous for its Birkin bag, is projecting a partly 8% sales growth in 2015, a lower figure than the 10% target the company set as recently as November 2014. Consequently, the luxury goods maker’s stock market value fell as much as 2%.

Until now, Hermes has fared better than it’s competitors in the luxury goods market, with the brand managing to maintain its air of exclusivity through high prices and limited availability. The brand’s flagship handbag, priced at $10,000, is outside the means of most beyond the upper crust of luxury buyers. The company said that sales excluding currency moves rose 9.6 percent in the fourth quarter, led by gains in its own stores.

According to Hermes, unfavorable swings in currency values, particularly fluctuations in the Japanese Yen, hurt profitability last year. The company said that its margins were likely between 31% and 32.4% (the record set by the company in 2013). Hermes commented that they expected the margin to narrow “slightly” in November. Despite weakening profits from Japan, Hermes enjoyed an 8.9% increase in Asia-Pacific sales, while quarterly revenue rose to 1.22 billion euros in the final three months of 2014, just shy of the 1.23 billion euro estimate set by analysts.

Recently, LVMH Moet Hennessy Louis Vuitton, the world’s largest luxury goods maker, began unloading its 23% stake in Hermes. The luxury group now owns less than 10% of the Hermes brand.

(via Bloomberg Business)