Hermes Joins Luxury-Goods Makers Reporting Chinese Recovery

(Bloomberg) -- The recovery in the luxury-goods industry gained pace after luxury handbag maker Hermes International SCA joined LVMH and Gucci parent Kering SA in saying the Chinese market is improving and pointed to growth in leather goods like its iconic Birkin bag.

Revenue climbed to 1.26 billion euros ($1.4 billion), Paris-based Hermes said Thursday, beating estimates. Sales climbed 8.8 percent excluding currency swings, led by 14 percent growth in Asia Pacific, the fastest rate in more than two years. The stock rose as much as 2.4 percent.

Sales of leather goods rose 16 percent, buoyed by $9,000 Constance purses and $5,000 Halzan shoulder bags. The maker of silk scarves joins rivals LVMH and Kering in reporting better-than-expected results, giving the luxury industry some relief ahead of the Christmas season. Others, like Britain's Burberry Group Plc, are still grappling with ebbing demand in key luxury hubs like Hong Kong.

“China is growing at a better pace, mainly because the economy is strengthening and because of domestic consumption,” Chief Executive Officer Axel Dumas said on a call with reporters. “In our case, I'm not talking about a rebound, because we always had growth.”

After sales growth of 7.7 percent in the first nine months of the year, Hermes maintained its full-year forecast for growth of “slightly” below 8 percent. Hermes remains cautious as the Christmas season approaches, Dumas said.

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“Management has always guided conservatively -- under-promise and over-deliver,” Rogerio Fujimori, an analyst at RBC Capital, wrote in a note to clients. Improvement in the Asian market and easier comparisons in France may buoy Hermes's sales, he wrote.

Revenue in France dropped 0.9 percent, while analysts had expected a 3 percent gain. Demand slumped in the fourth quarter last year in that market after the Nov. 13 terror attacks in Paris.

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net. To contact the editors responsible for this story: Matthew Boyle at mboyle20@bloomberg.net, Thomas Mulier, Eric Pfanner