Mar 19, 2009
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Hermes proves bastion of strength in tough market

Mar 19, 2009

By Astrid Wendlandt

PARIS, March 19 (Reuters) - French luxury goods group Hermes (HRMS.PA) said current trading was stable and it would continue expanding globally as it posted strong 2008 earnings, a message that contrasted with growing gloom in the sector.

Handmade, rolled hem silk twill pocket square by Hermes
Hermes, the world's second-biggest luxury group in terms of market capitalisation, said on Thursday trading in January and February was in line with its target of flat sales in 2009.

Steady revenues are an achievement in an industry expected to see global sales drop about 10 percent this year.

Hermes shares, which had fallen about 24 percent this year, were up 5.0 percent to a four-week high at 75.45 euros at 0905 GMT, with the DJ Stoxx personal and household goods index .SXQP, down 7.2 percent so far this year, down 0.1 percent.

Hermes, known for silk scarves and chic leather handbags, said 2008 operating profit from current operations rose 8.4 percent to 449 million euros ($606 million), above the average forecast for 441.6 million from Reuters Estimates.

Net profit rose 0.8 percent to 290.2 million euros, just above a forecast for 288.7 million. Hermes set its 2008 dividend at 1.03 euros, up 1 euro for 2007.

Hermes, whose women's fashion collection is designed by Jean-Paul Gaultier, said revenues at the end of February had risen slightly thanks to currency fluctuations.

At constant exchange rates, activity at its stores had improved but consolidated revenues fell slightly due to a drop in sales at other selling points, it said.

"The performance shows a good resistance in spite of the economic environment," French broker Natixis said in a note.

Hermes's 2008 results, among the last to be published by a major luxury group, came after Italian jeweller Bulgari (BULG.MI) and eyewear group Luxottica (LUX.MI) warned of tough times ahead as they posted disappointing numbers last week.

Many European luxury houses are having to slow global expansion, close shops and cut expenses such as catwalks as demand plummets in key emerging markets like Russia and big retail outposts such as the United States.

Italian fashion house Roberto Cavalli pulled a show last month due to financial problems at its distributor while Germany's Escada (ESCG.DE) announced last week it was fighting for survival after posting wider losses.

Italian fashion brands Gianfranco Ferre and Malo could be up for sale after their financially-strapped owner IT Holding (ITH.MI) went into administration.

But Hermes said on Thursday March 19 it planned to pursue its worldwide expansion and open or refurbish shops in Asia and in the United States. (Editing by Will Waterman and Dan Lalor) ($1 = 0.7412 euro)

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