Hermes International on Thursday forecast flat profits for 2007 because of the strength of the euro but its shares rose as better-than-expected third quarter sales calmed fears about demand for luxury goods.
The maker of trademark silks, perfumes and Kelly handbags said revenues in the three months to September 30 rose to 394.7 million euros ($579.1 million) from 351.4 million a year earlier, and it raised a key sales forecast it had cut twice.
Hermes Chief Financial Officer Mireille Maury told Reuters in an interview the group was confident about 2008, noting sales would benefit from the expansion of its store network in 2007 and a "slight pickup in Japan excluding exchange rates".
"Hermes robust Q3 figures and cautiously optimistic outlook for Q4 organic sales growth demonstrate that the luxury consumer remains resilient," HSBC analyst Antoine Belge said in a research note. HSBC rates Hermes "underweight". Brokerage CM-CIC said the figures should help the company's shares recover after they lost 10 percent in recent sessions.
At 1315 GMT, Hermes shares were 2.4 percent higher at 83.64 euros, outperforming the broader Dow Jones Stoxx personal and household goods index, which was down 0.2 percent. "Hermes is looking for annual sales growth of 8.5 to 9.5 percent at constant exchange rates and on a like-for-like basis," the company said in a statement.
"Operating income and net income are expected to be about the same as in 2006 owing to unfavourable exchange rate effects," it added. Hermes began 2007 forecasting annual like-for-like sales growth of 8 to 10 percent. It then cut the range in May to 8 to 9 percent and in June to between 8.0 and 8.5 percent. Maury said Hermes now expected full-year sales in Japan to grow by only 3 to 5 percent compared with a forecast at the start of 2007 of 5-10 percent, but this was being compensated for by strong growth elsewhere.
The US housing market had so far not dented sales with third quarter revenues there rising 14.8 percent at constant exchange rates. According to HSBC, Hermes told analysts that October trends were also good. It last month re-opened its renovated flagship store in the centre of Paris.
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