Strong Asian demand buoys sales at Birkin bag maker Hermes

Surging demand in Asia and especially mainland China helped Birkin handbag maker Hermes post better-than-expected sales growth for the second quarter, in an encouraging signal for some of its major luxury goods rivals.

The industry has so far largely shrugged off any fallout from a Beijing-Washington trade war that could potentially hit consumer sentiment in its two biggest markets, with appetite for branded goods if anything picking among Chinese shoppers.

Hermes - along with Louis Vuitton owner LVMH and Gucci parent Kering, which are also due to report results this week - has been one of the big beneficiaries of this benign backdrop.

The French company, best known for its pricey leather goods and squared silk scarves, said sales for the April to June period grew 14.7% on a reported basis to 1.67 billion euros ($1.87 billion), and were up 12.3% at stable exchange rates.

That marked a pick-up from the 11.6% comparable sales growth a quarter earlier, when several analysts had expected a slightly more muted performance, citing a tougher comparison base.

Revenues expanded at a brisk pace across Asia, accelerating from the quarter before in spite of political protests in Hong Kong, a big regional shopping destination.

Hermes finance chief Eric du Halgouet told reporters the company had to close two of its Hong Kong stores at certain points in June due to the demonstrations, but that the drag on sales was minor.

Chinese shoppers, who makes up more than a third of the luxury goods industry’s client base, have been increasingly spending at home rather than overseas, encouraged by government measures such as import tariff cuts.

Hermes said sales in continental China, where it recently revamped its e-commerce site, were particularly strong in the first half of 2019. It has just rebooted its online shopping site in Japan and will extend the overhaul to Singapore and Malaysia this year, du Halgouet said.

Hermes said operating margins for the six months to the end of June would be slightly below the record 34.5% reached in the first half of 2018, dampened by unfavorable exchange rate hedges, used to protect firms against currency swings.

It reports full results for the first half of the year on Sept. 11.