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UPDATE 3-Hermes lifts targets, points to luxury rebound (Oct 11, 2011)
12 pct at constant fx * Q2 sales up 19.8 pct at 567 mln euros at constant fx * Sees FY operating margin up 100 basis points vs 2009 (Adds details; updates shares) By Astrid Wendlandt, European luxury goods correspondent PARIS, July 20 (Reuters) - Hermes (HRMS.PA) lifted itsfull-year sales growth target on the back of surprisingly strongsecond-quarter figures, providing further evidence of abigger-than-expected rebound in the luxury sector. Hermes's upbeat trading statement, coupled withforecast-beating Swiss watch exports in June, helped liftsentiment towards the sector and some analysts said the numbersboded well for upcoming updates from the French company's peers. The luxury goods industry, whose revenues fell 8 percentlast year according to U.S. consultants Bain & Co, is slowlycrawling out of its worst downturn in decades, buoyed bytravelling shoppers from emerging markets. Hermes, which had cautioned earlier this year the spendingslump might not be over, said second-quarter sales beat its ownexpectations, prompting it to raise its full-year sales growthtarget to 10 to 12 percent from a previous target of 5 percent. "We think that the (luxury) market is doing well... Yes,there is a rebound," Hermes Finance Director Mireille Maury toldReuters in an interview. "There is also an internationalclientele who remains present, notably from China." Maury said the luxury group remained optimistic but in lightof last year's high comparatives, sales growth in the secondhalf would be slightly below that of the first half. The group also forecast the rise in first-half currentoperating income would be higher than the sales increase for thesame period. Hermes, known for its printed silks and 10,000-euro leatherhandbags, said wholesale revenue, traditionally its weakerbusiness, had improved in the second quarter, notably inperfumes and watches. Shares in Hermes were up 2.9 percent by 1228 GMT, whileshares in Burberry (BRBY.L) were up 1.1 percent, Richemont(CFR.VX) was up 0.03 percent. "We expect strong updates from luxury goods companies forthe first half, on the back of continuing strength in emergingmarkets, rebounding demand in the U.S. (which shouldparticularly help wholesale)...," Bernstein wrote in a noteabout LVMH (LVMH.PA) and PPR (PRTP.PA). Hermes also said on Tuesday it expected an increase of atleast 100 basis points in operating margin this year, up from aprevious forecast of a "slight increase". The French luxury group generated revenue of 567 millioneuros ($735.7 million) in the three months to June 30, up 19.8percent at constant exchange rates and 27 percent on a publishedbasis. NUMBERS IN THE BAG As always, leather goods remained the main driver of growth,with sales up 23.2 percent at constant currencies and 31.5percent on a published basis. Finance Director Maury said she expected sales trends inJapan, where Hermes made 20 percent of its revenue, to remainthe same in the second half as in the first."We do not have the feeling that it is the market which isimproving but that it is the brand which is doing well," Maurysaid about Japan. French broker Natixis said Hermes's sales target upgrade waspartly expected as previous forecasts looked conservative andadded the stock remained expensive, trading on 35 times thisyear's earnings against the luxury sector average of 21 times. Hermes shares have gained 23 percent so far this year. Rival broker Oddo Securities said that it planned to reviseup its operating profit forecast for Hermes by around 3 percentfor the current year and was anticipating an upward adjustmentto consensus of 6 to 7 percent. Maury said the group planned to invest 180 million euros inprojects such as new shops and the refurbishing of existingoutlets. In February, the company expected that figure to be 170million euros. ($1=.7706 Euro) (Editing by Hans Peters and Karen Foster)