(April 15): Hermès shares tumbled the most on record after the Birkin bag maker’s sales growth slowed, hit by the disruption from the conflict in the Middle East like many of its rivals in the luxury goods industry.
Sales rose 5.6% at constant exchange rates in the first quarter, Hermès International SCA said in a statement Wednesday. Analysts had expected a gain of 7.44%.
“These results are likely to be met with some disappointment despite moderating expectations,” Piral Dadhania, an analyst at RBC Europe Ltd. wrote in a note to clients.
Hermès shares fell as much as 14% in early Paris trading, the biggest intraday drop on record. Before Wednesday, the stock had fallen about 16% this year.
The region that includes the Middle East saw a 5.9% dip in sales during the period while revenue in France, a big draw for visitors, declined 2.8% as it was hit by lower tourism spending. Chief financial officer Eric du Halgouet said Hermès’ French, Swiss and UK stores drew fewer Middle Eastern shoppers. Italy, which was also hurt, proved more resilient. On a call with reporters, du Halgouet said although traffic is still down at the start of the current quarter, Middle Eastern sales have improved following the reopening of stores.
Like Hermès, LVMH Moët Hennessy Louis Vuitton SE earlier this week said the war dented sales. Revenue at LVMH’s key division, which includes Louis Vuitton and Christian Dior Couture, would have been “flattish” instead of negative had it not been for the conflict, the company’s chief financial officer Cécile Cabanis said. Kering SA also posted worse-than-expected sales at its biggest brand Gucci, partly blaming the war.
See also: Gucci sales fall as long-awaited revival slow to take shape
For Hermès, another region that disappointed was Asia Pacific, excluding Japan, which saw a 2.2% rise in sales at constant rates, less than half the 5.84% gain analysts had expected.
Hermès last week inaugurated its 25th leather goods manufacturing plant, showing it’s sticking to investment plans in spite of the geopolitical turmoil.
Uploaded by Arion Yeow
