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French handbag maker Hermes posts record first half margins

International Business
Wed, 12 Sep 2018

PARIS: France's Hermes on Wednesday said operating margins reached the first-half record at the start of 2018, after resilient demand in key markets like China helped the luxury handbag maker and most of its major rivals lift profits.

The label, known for its $10,000-plus Birkin bags and patterned silk scarves, said recurring operating income reached 985 million euros ($1.14 billion) between January and June, up 6 per cent from a year earlier. ($1 = 0.8633 euros)

That did not include one-off items such as the disposal of shops in Hong Kong. Recurring operating margins reached the first-half record at 34.5 per cent of sales, up from 34.3 per cent in the first six months of 2017.

Luxury goods makers from Louis Vuitton owner LVMH to Gucci-parent Kering have benefited in the past two years from rebounding appetite from Chinese shoppers for their fashion ranges and handbags, boosting sales.

In July, Hermes reported robust revenue growth for the second quarter from a year earlier and said demand in China was still strong in spite of a trade spat between Beijing and Washington.

That remained the case, Hermes Chief Executive Axel Dumas told journalists on Wednesday.

"There has not been any change in trend so far," Dumas said.

Chinese consumers are key for luxury brands, accounting for around a third of all global sales in the industry. Fears of a slowdown in Chinese had rattled shares across the sector in recent months.

Shares in Hermes, one of the most highly-valued stocks among luxury players, are up 20 per cent since the start of the year. 

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