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Luxury Group Hermes Raises 2011 Sales Forecast


Hermes raised its full-year revenue forecast on Tuesday as growing demand for its silk scarves, fashion accessories and leather bags showed no sign of slowing despite a foggy economic outlook.

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The luxury group now expects consolidated revenue growth at constant exchange rates of 12-14 percent in 2011, up from a previous range of 8-10 percent, after what it described as a "better-than-expected performance" in the second quarter.

Sales in the three months to June 30 jumped 22 percent at constant exchange rates to 668.4 million euros ($945.4 million), Hermes said, exceeding some analysts' forecast of a growth rate closer to 14 percent.

Hermes shares have soared in the last three months on brewing speculation of a possible takeover by 20-percent stakeholder LVMH as the stock's free float slowly dries up. LVMH has said it has no intention to make a bid.

"Growth was driven by the United States and China, with solid momentum across all geographic regions other than Japan, where revenues remained stable in spite of the catastrophic events in March," Hermes said in a statement.

"The distribution network continued to expand with the opening of six new branches." Hermes said it probably achieved significantly higher growth in operating profit than sales in the first half of the year, with a 4-5 percentage point rise in its pre-tax profit margin after it sold its stake in fashion house Jean-Paul Gaultier.

Hermes is due to report first-half earnings on Aug.31. Hermes said its underlying full-year operating margin would be close to last year's level.

It added that it would continue to expand its distribution network and open more than 10 branches this year.

Luxury peer Burberry, which makes raincoats and leather goods, last week posted a forecast-beating 34 percent rise in revenue on a comparable basis for its first-quarter through June.

Hermes' stock has gained nearly 50 percent since mid-April, while the broad French market has suffered a correction over the same period.

Hermes shares trade at 42 times expected earnings for 2012, by far the highest price-to-earnings ratio in the pricey luxury sector.