Luxury goods maker Hermes (HESAY) scrapped its numerical medium-term revenue goal, citing "economic, geopolitical and monetary uncertainties around the world." The firm had previously targeted medium-term revenue growth of around 8%.
"The group confirms an ambitious goal for sales growth at constant exchange rates but not quantified any longer," the Paris-based luxury retailer said. The commentary came alongside first-half earnings results announced on Wednesday.
The fashion house, whose products include the Kelly bag, silk scarves, and horse saddles, has fared better than most in the luxury retail market, which has been hit by security worries and a slowdown in the Chinese tourist destinations of Hong Kong and Macau. Today, Swiss luxury watchmaker Richemont (CFRUY) said it expects first-half operating profit to drop 45% year-on-year.
Shares in Hermes plunged 6.8% to €360.7 ($404.90) in morning trading in Paris. Richemont shares dropped 3.6% to €57.65.
In the first half, net profit advanced 13.0% year-on-year to €545.4 million on 6.1% revenue growth to €2.44 billion, which was just above the €2.43 billion analysts' consensus, as reported by the Financial Times. Operating profit rose 10.5% to €826.8 million. Hermes initially reported its first-half sales figures on July 21.
On Wednesday, Hermes confirmed that first-half revenue rose worldwide, with sales up 10% in Japan, 5% in Asia excluding Japan, 8% in America, and 8% in Europe, on a constant currency basis. By segment, it achieved 16% sales expansion in its leather goods and saddlery business, 4% growth in perfumes, and a 1% increase in its watches business. These offset declines in operations including the ready-to-wear and accessories unit, which sales fell 2%, and silk and textiles, where revenue dropped 7%.
In the second quarter, group sales rose 8.1% to €1.25 billion on a constant currency basis.
Operating margin expanded 1.4 points year-on-year in the first half thanks to "favorable impact of foreign exchange hedges taken last year," Hermes said.
For the whole of 2016, the company reiterated its revenue outlook, as announced on July 21, of growth of below 8% at constant exchange rates. Meanwhile, it expects operating profit margin to be "slightly higher than in 2015."