Hermes Posts Record First-Half Profitability on China Boom

(Bloomberg) -- Hermes International reported record first-half profitability as the maker of $10,000-plus Birkin handbags benefited from brisk sales in China, a trend that shows no sign of easing off even as stock prices slump in the Asian nation.

Recurring operating income amounted to 34.5 percent of sales, up 0.2 point, the Paris-based company said in a statement Wednesday. Analysts predicted 34.4 percent, based on the median estimate compiled by Bloomberg News.

Investors in the luxury sector are watching closely to see if a China-driven boom will drift to a soft landing or if wallets will snap abruptly closed. In July, Hermes reported that first-half sales rose 13 percent in Asia at constant exchange rates despite a rout in the Shanghai stock exchange and concerns about a trade war with the U.S.

“There’s not been any change in trend so far,” Chief Executive Officer Axel Dumas said of China on a call with reporters.

Recurring operating income climbed 6 percent to 985 million euros ($1.1 billion) in the first half, “thanks to a particularly sound growth” and favorable currency rates, the company said. Hermes reiterated its goal for revenue growth at constant exchange rates.

Hermes shares climbed 3.4 percent to 552 euros at 9:11 a.m. in Paris. They have returned 28 percent in the past year, compared to a 4 percent return for a Bloomberg Intelligence index of European luxury-goods stocks.

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