Hermes Sees China Demand Undented by Shanghai Stock Decline

(Bloomberg) -- Hermes International is weathering a decline in China’s stock market, saying sales in the country are still growing at a rate of more than 10 percent.

First-half profitability remained near record levels and second-quarter sales rose 12 percent, beating analysts’ estimates, according to a statement from the Paris-based company Friday.

The 13 percent drop in Shanghai’s CSI 300 Index this year isn’t fazing the maker of the Birkin bag. Growth is still double-digit in mainland China, according to Chief Executive Officer Axel Dumas. The company is being careful on prices, reducing them by around 4 percent at the start of this month, passing on the benefit from a reduction in import duties to consumers.

“For China I really don’t see any change of pace,” Dumas said on a call with reporters, adding that the company is closely monitoring indicators like real estate values and Chinese stock prices.“Our clients are much more taking into account their net worth than their revenue, so any change there we need to take care.”

The stock fell 0.2 percent as of 9:08 a.m. in Paris.

Hermes is more insulated from luxury’s boom-and-bust cycles by long waiting lists for iconic leather goods like the $10,000-plus Birkin bag. But the continued high demand Hermes is seeing in China gives a positive signal for French luxury conglomerates LVMH and Kering, which report earnings next week.

Strong organic growth helped Hermes match last year’s record margins, which had a non-recurring boost from currency hedges, RBC Capital Markets analyst Rogerio Fujimori said by phone.

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