Region wise, organic growth in Europe over the second quarter reached 9 percent, while in Asia and the Americas, the increase was slightly larger, of 10.9 percent respectively.
As seen earlier this month with Burberry, China in general and Hong Kong in particular, is not the panacea for luxury fashion retailers anymore. Political turmoil, the Government’s fight against bribery and corruption, and increased visa restrictions that have constrained mainland tourist visits to Hong Kong have slowed down the formerly ever-growing sales in the region.
Japan replaces Hong Kong as the main luxury shopping destination in Asia
And recently, more of those sales are happening in Japan, Hermès told analysts on Tuesday. Of the same opinion is Antoine Belge, an analyst at HSBC, who said Chinese tourists now favour other parts of Asia, notably Japan. The country is quickly emerging as a top destination to shop as Chinese tourists seek alternatives to Hong Kong, which has long been the traditional first stop of choice, added Hermès.
Sales in Japan increased 33 percent in the second quarter alone thanks to the increasing influx of Chinese tourists, the company told analysts. At constant exchange rates, Japanese sales still grew 27 percent. Japan “stayed striking,” pointed out Luca Solca, an analyst at Exane BNP Paribas in London. Sales growth there beat analysts’ estimates by about 10 percentage points, recalls Bloomberg.
Meanwhile, in the Asia Pacific region outside of Japan, sales jumped by 28 percent, although the increase is notably smaller once the effects of currency are stripped out: sales in the region grew just 6 percent.
Weak euro “still favourable” for Hermès
Almost again the current, Hermès has seen an evolution of exchange rates that “is still favourable,” with a positive impact of 224 million euros in net sales at the end of the semester.
Thus, the positive impact of the weak euro—sales made in other currencies count for more when converted back to euros—remained the biggest reason for the company's large revenue increase, highlights Fox News.
The company said its profit margins "should be down slightly in comparison with the first half of 2014" due to the weaker euro, though it didn't specify how.
"The upside potential is still too limited to take a positive recommendation," said the CM-CIC, reports ‘Boursier’."With good visibility on growth, Hermès remains a beautiful background value portfolio with an expected IRR of 8 percent within 5 years, including 1 percent from performance" continues the broker, which currently holds a price target of 350 euros on the stock.
By business line, Leather goods shown a 14.9 percent improvement, while Clothing & Accessories stood out at + 6.4 percent and Silk & Textiles contributed with another 3.2 percent. Perfumes (+ 6.8 percent) and watches (+1.2 percent) also rose.