Hermes forecasts drop in full-year margin

PARIS, France - Hermes, maker of luxury scarves and handbags, stepped out ahead of some top competitors in the first half of the year, reporting an 8.0-percent net profit rise on Friday.

The group, which owns the Kelly and Birkin handbag brands, reported a net profit of 413 million euros ($544 million) for the period even though operating margins fell sightly.

Activity continued to be driven heavily by sales in Asia which account for nearly half of all group sales.

However, operating profit in absolute numbers rose by 6.5 percent to 621 million euros, which was slightly better than expected by analysts polled by Bloomberg who had forecast on average a figure of 617 million euros.

This outpaced leading giant French luxury groups LVMH and Kering on the fashion stage.

LVMH which owns the Louis Vuitton, Celine and Givenchy brands among many others, has reported that first-half operating profit fell by 5.0 percent to 2.57 billion euros.

Gucci, the top brand owned by Kering, has reported that operating profit fell by 5.1 percent to 528 million euros, but generated an operating margin, a key measure of profitability, of 31.5 percent.

Hermes also experienced a slight erosion of its margin in the first half of the year from the equivalent figure last year to 32.6 percent from a record 33.1 percent, mainly because of the effect of unfavourable currency factors, the company said.

The group held to its forecasts, which tend to be on the cautious side, saying it was pursuing its medium-term target of raising sales by 10.0 percent at constant exchange rates.

For the whole of this year, it expected margins to be lower than the record of 32.4 percent last year, because of unfavourable exchange rates.

In the middle of July, Hermes published sales figures for the first half which showed an increase of 7.9 percent to 1.9 billion euros.