Hermès sales surge thanks to Japanese VAT increase

Buyers anticipate VAT increase

Japan, an important market for Hermès, was a very strong performer in 2014’s first quarter as sales grew 21.7 % (in local currency). The announced price hikes and a higher VAT percentage, which kicked in on 1 April, meant that a lot of consumers preemptively bought something. That is why CEO Axel Dumas expects lower Japanese sales in the second quarter, even though he still believes the full-year results will show positive growth.

In Asia, excluding Japan but mostly focused on China, sales grew 17.7 % (in local currency), while the Americas enjoyed a 17.9 % surge. Europe lagged behind a bit because of the crisis, but still managed a 7.9 % increase. South European sales also improved slightly, but its home market – France – could not keep up with the pace at 5.9 %.

Especially the ready-to-wear (prêt-à-porter) and accessory divisions performed well, with a 19.1 % turnover increase. The leather-wear division grew 15.5 %, with the perfume division at a 5.9 % increase and the watch division remaining flat.

Stronger growth than the competition

The worldwide first quarter turnover reached 943.5 million euro, 10 % higher than the same period last year. Nevertheless, exchange rate fluctuations impacted the numbers somewhat, because if they had remained level, the turnover would be another 40 million euro higher.

The turnover increase was still stronger than anticipated, especially when one looks at the competition. LVMH and Gucci managed a like-for-like turnover increase (in the first quarter of 2014) of respectively 9 and nearly 1 %.