French luxury group Hermes sales tumble due to the fallout of the coronavirus pandemic

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French luxury group Hermes said on Thursday comparable sales in the second quarter fell by 42% due to the fallout of the coronavirus pandemic and that the impact of the health crisis for the whole year was too difficult to assess at this stage.

Hermes, maker of the $10,000-plus Birkin bag, said sales were now growing strongly in Asia again after the lockdown was eased and that all stores were open there.

The situation remained “difficult”, even though it was improving, in Europe and the United States, CEO Axel Dumas told reporters.

He added that it was impossible to predict when foreign tourists, which in the summer months can represent 70% of European sales for luxury groups, would resume travelling.

The crisis ate into Hermes’ operating margins, which have long been among the highest in the luxury goods industry.

These held up better than at some rivals including Louis Vuitton owner LVMH, but still fell to 21.5% compared to 34.8% a year earlier.

In a sign of confidence, Hermes said it had hired 300 people in the first six months of the year – mostly in production – and that it continued to invest to expand its manufacturing capacity for leather goods.

At the peak of the health crisis, which first erupted in China and then spread to Europe and the United States, Hermes had to temporarily close 75% of its stores and put production sites on hold.

Dumas said online sales had increased by 100% or more in China and the growth had continued even after stores reopened there.

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