Hermes shares tumble as revenue growth fails to impress

(Sharecast News) - Herm�s shares slumped on Wednesday as the luxury group's first-half revenue growth disappointed investors, despite resilient demand for its leather goods and strong profitability.

First-half revenue increased 6.1% at constant exchange rates to �8.16bn, but rose just 1.6% on a reported basis, reflecting a currency headwind of more than �360m.

Second-quarter sales reached �4.09bn, up 6.7% at constant currencies and 4.8% at current rates, but below analysts' estimates.

Growth remained subdued in Asia-Pacific excluding Japan, Herm�s' largest region, where first-half sales rose only 2.4% at constant currencies.

Revenue in the Middle East declined 4.2%, while France grew 1.8%. The Americas and Japan performed more strongly, with constant-currency growth of 15.3% and 11%, respectively.

Leather Goods and Saddlery sales rose 9.8%, but Ready-to-wear and Accessories increased only 2%. Watches sales were broadly flat, while Perfume and Beauty revenue declined 4.5%.

Recurring operating income edged up to �3.35bn from �3.33bn, although the margin narrowed to 41% from 41.4%. Net profit attributable to shareholders was broadly unchanged at �2.24bn. Adjusted free cash flow jumped 18% to �2.18bn, while the restated net cash position stood at �12.93bn.

Executive chairman Axel Dumas said Herm�s delivered a "solid performance" in its first half, while the company maintained its "ambitious goal for revenue growth at constant exchange rates" over the medium term, despite economic, geopolitical and monetary uncertainty.

The stock was down 11.2% at �1,506 by 1310 BST.