Hermès beats after posting strong first-half profit but warns of forex fluctuations

The purveyor of €6,000 Birkin handbags has beaten forecasts with half year operating profit up 6.3 per cent despite currency exchange issues.

Hermès, the French luxury giant, revealed half year operating profit of €621m but confirmed currency fluctuations had hit margins.

Its full year operating margin will be below last year’s 32.4 per cent.

Earlier this summer Hermès reported a slowdown in its second-quarter sales growth of 5.8 per cent against 10.1 per cent in the first quarter. A slump in Japanese sales due to a VAT rise had been an issue but sales across the rest of Asia were strong for the silk scarf and leather goods maker.

Today it reported an 8 per cent rise in sales at constant exchange rates to €1.9m.

In a statement from Hermès it said it was “retaining its mid-term objective of revenue growth at constant rates of around 10 per cent.”

Luxury expert Luca Solca, at Exane BNP Paribas, said: “We remain convinced that Hermès is the most defensive name in the luxury space: a long waiting list plus a deliberate effort to ‘starve demand’ and maintain a ‘rarity effect’ means Hermès’ growth and margin performance is more stable than peers.”

Yesterday Italian luxury goods brand Salvatore Ferragamo reported weaker first half net profit of €82m due to a one off sale in the previous year. But the results were better than analysts had expected and earnings at the brand famous for its shoes were up 8 per cent to €90m.

Sales in Asia continued to be strong but it noted a weaker tourism spend in the period – particularly affected by Russian shoppers staying at home following the violence in the region.

Currency changes were also an issue for the leather goods group but second-quarter sales were up 5 per cent compared to a year ago to €360m.